Why tuition fees for international students won’t work

For a few years now there has been debate about setting tuition fees for international degree students in Finland. Developments concerning the ongoing tuition fee trial for non-European Union and European Economic Area students (2010-14) have been reported by University World News a couple of times.

In addition to the trial, during the regime of the current government (2011-15) these fees have been debated every spring in government negotiations on its spending limits.

The two main positions centre on education export and taxpayer arguments, but are based on several fallacies.

Education export and the ‘necessity’ of fees

The widest used argument in the current debate is based on the concept of ‘education export’.

The concept in Finland roughly corresponds to the British concept of transnational education, but is wider in the sense that education export includes all commercial elements of education, for example teaching facilities, capacity building, infrastructure and school and curriculum management.

In 2010 the ministerial working group preparing the Finnish education export strategy used the UK and New Zealand as models of well-functioning education markets and referred to the World Trade Organization’s GATS – General Agreement on Trade in Services – as a point of departure.

The argument for tuition fees goes as follows: Finland has a renowned education system and capitalising on it financially would increase the Finnish export revenue and in part help the economy to recover from the downturn.

This strategy, according to its advocates, is hindered by the fact that in Finland education is tuition-free by law, and thus it is necessary to remove the ‘obstacle of tuition-free education’ and allow higher education institutions and secondary schools to collect fees from non-European Union and European Economic Area students.

What is missing in the argument above is a knowledge and understanding of international education markets.

First: international students and buyers are not clueless travellers grabbing anything that comes their way. Instead, there are particular fields of study that attract international students from different countries.

For example, in the United Kingdom and the United States the majority of international students are studying in programmes linked to business and engineering while in The Netherlands students are going for economics and social sciences.

So we should ask: what are the niche markets for Finnish education? According to universities and Finnish embassies, it is public administration, education and social services (including health and medicine) that attract international students to Finland.

This leads to a second point: the interest in buying Finnish education is shown by overseas national authorities and institutions and international organisations, not individual students.

This is natural in the sense that the above-mentioned subjects are such that they are either too expensive for an individual student to purchase, or they are subjects that lose out in competition with economics, law etc when it comes to the earnings premiums that the degree promises.

So, if a prospective student is considering whether to invest, say, €60,000 (US$80,130) in a (Finnish) teacher education that does not generate large earning benefits, or £25,000 (US$42,000) in a business degree that will generate large benefits, then it’s not difficult to predict what the investment-minded student will choose.

This leaves us with the conclusion that Finnish advocates of education export should be looking for institutional buyers (states and sub-government public authorities, international organisations, companies etc) instead of individual students.

Finnish higher education institutions are already able to offer a so-called ‘made-to-order education’ under the Finnish Universities Act, Section 9. This means that they can sell degrees to institutional buyers and the buyers may decide what kind of degree they wish to have and – within a general quality standard – who they wish to have educated.

This holds true as long as the buyer does not charge the students they are sending fees. This act was introduced in 2008, and gives permission to Finnish higher education institutions to respond to market demands. What is difficult in this concept is that institutions have been little interested in getting down to business – even in cases where there were concrete offers and proposals.

It is noteworthy here, that everything else except trading degrees for tuition fees is already possible in Finland: individual courses, modules and continuing education are tradable, and further education operates purely on a market basis. In fact, the best performing Finnish education industries operating abroad are trading further education and selling made-to-order education.

Therefore, rather than blaming tuition-free education for being a barrier to business, one should be asking why it is that there is no interest in grasping the business opportunities that are already available? Especially when made-to-order education is in financial terms both much larger business and a far more stable source of funding than individual students.

The answer is lack of know-how and a lack of cooperation between higher education institutions. The Finnish government and ministry have not been much help as they are too stuck in the stagnated argument about whether there should be fees or not.

The national student union has not stood still, but went forward last fall with proposals for developing education export while still preserving tuition-free education. This strategy was welcomed by many export practitioners and stakeholders, but its political value was lost after the old tuition fee debate started again this spring.

Austerity politics and the taxpayer argument

The second widely used argument is based on the common-sense assumption that international students come to Finland, enjoy Finnish social security, obtain their degree and leave the country: they enjoy free taxpayer-paid education, but give nothing back.

Therefore Finnish higher education institutions should be forced to collect tuition fees from them – no taxpayers’ money should be wasted.

This argument is more flawed than the export argument.

The first clear mistake is that international students are not entitled to Finnish social security; they have to sustain themselves. Secondly, the argument ignores the fact that over 70% of international students stay in Finland after graduation and within a year 70% of them – that is, 50% overall – find a job in Finland.

Taking into account the taxes they pay (with Finnish tax rates) and the ‘investment cost’ of free education, this makes a profitable investment for the state in a few years – even if 30% leave the country. This, I believe, is the logic behind the OECD-originated idea of recruiting international talent.

The third flaw in the argument is related to the first argument about international students having to finance their living in Finland. According to some preliminary calculations this amounts to a €200 million (US$267 million) capital flow into Finland annually, which is around twice as much as could be gained via tuition fees even in the wildly unrealistic optimum case.

Setting fees would cause international student numbers to plunge like in Sweden, which would cause a crash in the flow of capital via living expenses expenditure. So, actually, it could be the case that the foreign capital flow into Finland would dive if tuition fees were introduced. This suggests that tuition-free education actually attracts more foreign spending into Finland than the tuition fees would.

There is also a fourth flaw in the ‘saving taxpayers’ money’ argument. There are indeed few lessons to be learned from the Finnish tuition fee trial, but one is clear and undeniable: as in Sweden and to some degree in Denmark, it would be the case in Finland that if fees were introduced, the number of international students who would actually come in and pay the full fee would be low.

This has nothing to do with quality of education nor other education-related issues, but with the fact that the total cost for students to study in Finland would be too high. Living in Finland is very expensive, and throwing full cost tuition fees – as required by the proponents of this argument – on top of that would make studying in Finland a no-go option for many.

Generous scholarships, as in Sweden, would be needed to help these students. This, of course, would be more or less the same as free education anyway. But not quite: it would be more costly. The administration of the scholarship systems, with all the work needed to decipher the students’ social conditions etc, would require extra funding.

As eloquently put by a vice-rector of one Finnish university: “The university would have to become a detective too.”

In the case of the few students who actually paid the fee, this would lead to a situation where collecting fees became more costly to the higher education institution – and the state – than tuition-free education. In the tuition fee trial this has actually been the case for one university and will very likely be the case for many others when one counts the working hours of staff in international offices.

This is a very counter-intuitive result, but actually not unbelievable: tuition fees may become a costly option.

Don’t charge international students fees

So, what does it come down to?

It all comes down to the fact that international students cannot afford to study in Finland if tuition fees are collected: the recruitment pool of Finnish higher education institutions is not the sons and daughters of millionaires, but the children of the middle-classes in developing countries.

For them, tuition-free education is a sign of social justice and a guarantee of equal opportunity. And for them, tuition free education is a clear pull-factor onto which Finland should hold in the competition for international talent.

The same is true when it comes to education export: Finnish education is a reflection and a creation of the Nordic welfare society and the excellence of its quality is based on a long tradition of building a socially sustainable society.

It is stated in the Universities Act itself: besides promoting free research and education, the mission of Finnish universities is to educate students to serve their country and humanity.

If education export is developed according to this principle – and it should be – then tuition fees are not needed. And putting a fee barrier in the path of international students coming to Finland is not exactly serving humanity either. Tuition-free education, on the contrary, fits this purpose well and is therefore worth promoting.

* Jarmo Kallunki is education policy officer at the National Union of University Students in Finland.