Tuition fees differ markedly between nations

The cost of higher education and the best way to support students in paying for that education are among the most hotly debated public policy topics in education today, according to the latest OECD report Education at a Glance 2014.

The report says the level of tuition fees charged by tertiary institutions – as well as the amount and type of financial assistance countries provide through their student support systems – can greatly influence access to and equity in tertiary education.

“Striking the right balance between providing sufficient support to institutions through tuition fees and maintaining access and equity is challenging. On the one hand, higher tuition fees increase the resources available to educational institutions, support their efforts to maintain quality academic programmes and develop new ones, and can help institutions accommodate increases in student enrolment,” the report states.

“Thus, several factors influence the level of tuition fees, such as the salary of professors in the competition to hire the best ones in a global academic market; the development of non-teaching services (employability services, relations with companies); the growth of digital learning; and investments to support internationalisation.”

But the report’s authors also point out that tuition fees may restrict access to higher education for students – particularly those from low-income backgrounds – in the absence of a strong system of public support to help them pay the cost of their studies.

“In addition, high tuition fees may prevent some students from pursuing fields that require extended periods of study, especially when labour market opportunities are not sufficient in these fields. On the other hand, lower tuition fees can help to promote student access and equity in higher education, particularly among disadvantaged populations.”

Even so, the writers note that low fees may also constrain the ability of tertiary institutions to maintain an appropriate quality of education, especially in light of the massive expansion of tertiary education in all OECD countries in recent years. In addition, budgetary pressures stemming from the global economic crisis may make it more difficult for countries that have lower tuition fees to sustain this model in the future.

Differentiating tuition fees by level of education, field of education, student background or mode of delivery is a way for countries to adjust the level of tuition fees to take into account equity issues to access tertiary education, costs to provide education and labour market opportunities, the report says.

That so many factors influence a country’s decision on whether to impose tuition fees and how much they should charge has resulted in large differences among countries in the average tuition fees imposed on domestic students enrolled in first-degree programmes.

Public universities in nine countries, however, do not charge tuition fees: The five Nordic countries of Denmark, Finland, Iceland, Norway and Sweden, as well as Mexico, Poland and Slovenia. Last month, Germany’s Lower Saxony joined that nation’s other states in abolishing tuition fees for the coming academic year.

By contrast, annual tuition fees in public institutions were more than US$1,500 (in 2012) in a third of the countries with available data, and they exceeded US$5,000 in Chile, Japan, Korea and the US. Meanwhile, in Austria, Belgium, France, Italy, Spain, Switzerland and Turkey, students pay only small tuition fees.

Among the 21 EU countries for which data are available, only the Netherlands, the Slovak Republic and the UK have annual tuition fees that exceed US$1,500 per full-time national student.

“Tuition fees charged for national students in second-degree and further programmes are generally not much higher than those charged for first-degrees. In the majority of the countries with available data, the fees charged are stable or slightly higher than those for first-degree programmes,” the report states.

Exceptions are Australia, Chile, Ireland and Britain. For public universities in Australia, the amount charged increases by 55% from undergraduate to postgraduate degrees although fees for these may fall slightly in some private institutions. Australia, Chile and the UK also differentiate fees by field of education in first-degrees. Turkey, on the other hand, is the only country where fees are lower for second-degree and further programmes at public institutions.

Collectively, students around the world invest about US$50,000 each to earn a degree, the report says. In Japan, the Netherlands and the US, average investment exceeds US$100,000 when direct and indirect costs are added.

Direct costs include tuition fees while indirect costs may include books and living expenses along with higher income taxes after graduation, social contributions and levies. Then there is the loss of salary because of delayed entry into the labour market, and fewer entitlements to social transfers, such as housing allowances, family allowances or supplemental social welfare benefits.

On average, direct costs such as tuition fees constitute about one-fifth of the total investment made by a tertiary graduate. Apart from subsidising the direct costs of education, however, a number of countries also provide students with loans and grants to improve incentives and access to education.

The OECD analysts note that the effect of grants is particularly important in Denmark and the US where they cover around 35% or US$29,000 and 26% or US$27,000 respectively of the students’ total costs of tertiary education. In Austria, Finland, the Netherlands and Sweden, grants are US$8,000 or more – about 15% of the total cost of tuition.

Countries that have the highest direct costs of tertiary education, notably Australia, Canada, the UK and the US, provide small grants compared to the direct costs. In Australia and Canada, grants cover less than 5% of direct costs, while in Japan and Korea, direct costs are also among the highest, although the two countries provide no information about grants.

Many nations have followed Australia’s lead and now offer student loans which must be repaid after graduation. Loan regulations, particularly regarding when graduates have to start repaying their loans and the applicable interest rate, vary widely between countries.

“For most student loans, the total amount to be repaid and the amount to be repaid per period depend on the graduate’s employment status and actual income earned after graduation,” the OECD report says.

“Nevertheless, the availability of student loans, coupled with adequate information and guidance on how they work, can encourage students, particularly those from socio-economically disadvantaged backgrounds, to pursue their studies. But, because loans must be repaid after graduation – and thus subtracted from earnings benefits – they reduce the financial benefits of a tertiary education.”

Rather than loans, countries that offer particularly large grants are the Nordic nations of Denmark (US$29,000), Finland (US$9,000) and Sweden (US$8,000), as well as Austria (US$11,000), the Netherlands (US$14,000) and the US (US$27,000).

The analysts note that the available data show no relationship between direct costs to the students and the grants made available to them. Countries where grants are higher do not always have the highest private direct costs while, conversely, among the five countries where direct costs are the highest – US$20,000 or more – only the UK and the US provide substantial grants to students.

Full-time national students in first-degree programmes in Australia, Canada, the Netherlands, New Zealand, the UK and the US face comparatively high levels of tuition fees and well-developed student loan systems. On the other hand, Denmark, Finland, Norway and Sweden have no tuition fees along with well-developed student support systems.

In the Netherlands, grants or scholarships have a larger impact than loans because grants are more widely accessible than loans and are larger on average. As a result, more than two in three students receive grants, compared with the one in three who take out loans.

In Canada, students benefit from relatively high remission rates where a large portion of the average loan is expected to be written off if studies are completed. The overall benefit from loans is nonetheless counterbalanced by the relatively high average cost of loans, with high interest rates charged after studies are completed.

Not surprisingly, the impact of loans is negligible in Belgium, France and Spain, as these countries have comparatively low tuition fees and less-developed student support systems, the report notes.

Whatever costs are incurred by students undertaking higher education, the report says that in most countries the public returns are substantially higher than those available to students enrolled in upper secondary or post-secondary non-tertiary education. This is because of the higher taxes and social contributions that flow from the higher incomes of those with tertiary qualifications.

On average across OECD countries, the report says the public net return from an investment in tertiary education is more than US$105,000 for a man and more than US$60,000 for a woman. Taking into account direct costs, foregone earnings, and public grants, the public benefits for a man with tertiary education are four times higher than what it costs him, and for a tertiary-educated woman are 2.5 times higher.

“Direct costs for education are in large part borne by the public sector. For instance, on average across OECD countries, the direct costs for a man attaining tertiary education are around 30% of the total private and public direct investment costs,” say the OECD analysts.

“Only in a few countries, notably Australia, Japan, Korea, the UK and the US, do private direct costs such as tuition fees constitute more than 55% of the overall public and private direct investment costs.”

* This article is drawn from the chapter, “Financial and Human Resources Invested in Education” (pp 201-221 and indicator series B) in the OECD report Education at a Glance 2014.