Research process. 2. Public funding to students (different aspects of public support to students)

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1 Financing the Students Future Presenter: Rok Primožič Member of the Executive Committee, European Students Union FINST hypothesis authors: Hanna-Stella Haaristo, Bethan Payne, George K.- Charonis, Moritz Maurer, European Students Union The European Students Union (ESU) is the umbrella organisation of 47 National Unions of Students (NUS) from 38 European countries. The aim of ESU is to represent and promote the educational, social, economic and cultural interests of students at the European level towards all relevant bodies and, in particular, the European Union, the Bologna Follow-Up Group, the Council of Europe and UNESCO. Through its members, ESU represents over 11 million students in Europe. Financing Students Future (FinST) is a comprehensive research exercise on the landscape of Higher Education funding systems in Europe and their fitness for purpose, in combination with the effects of the student unions policies on funding. The project aims at researching the impact of various funding mechanisms of the European Higher Education Area on students, access, participation and completion of Higher Education and empowering student representatives for the debates about national funding reforms in higher education. ESU is running this project together with four partners in the consortium: EUL, OH and NUS-UK, which are national unions of students, and HIS as a research organisation that is known for its expertise in carrying out studies and other research in the field of higher education. The project focused on research as well as on capacity building of student organisations and representatives on the topic of financing higher education. As the focus of this article is to present the research part, more information about the FINST project in general can be found at: esu-online.org/projects/current/finst/. Research process The FINST research team prepared a detailed research plan outlining the main points of interest that the project would address. Four main topics were identified to provide the team with different perspectives of the funding systems: 1. Overview of national funding systems (overview of the main aspects of national systems, such as total spending on higher education etc.) 2. Public funding to students (different aspects of public support to students) 3. Student income and expenditure (students private financial situation and costs of pursuing higher education in each country) 4. Impacts and outputs (impacts of different funding systems on participation in higher education) Based on this structure, the team set a hypothesis for each one of the four topics to, not only compare the data from different countries, but also to try and identify patterns and different typologies of funding systems. As there are already a lot of sources and research on these topics, it was decided to carry out desk research of the already existing research and test the hypothesis with chosen indicators. This part was entirely secondary research, with no primary research being conducted for the mapping process. 1 The sources that were used were: OECD, 2010: Education at a Glance 2010; eurostudent, 2011: Social and Economic Conditions of Student life in Europe , Summary document; eurostudent/eurostat, 2009: The Bologna Process in Higher Education in Europe: Key Indicators on the social dimension and mobility; eurydice, 2011: Modernisation of Higher Education in Europe: Funding and the Social Dimension; cheps, 2010: Progress in higher education reform across Europe: Governance and Funding Reform; Volume 2: Methodology, performance data, literature survey, national system analyses and case studies 1 1 In addition, it was entirely Internet based. If a source could not be located online, then the team did not look to find its paper version elsewhere. This was because it would be unfeasible to try and locate paper-based evidence for a research project spanning 38 different countries. This also meant that all data collected was already available for public use.

2 Hypotheses Hypothesis 1: Most of the countries observed are using cost sharing to cover increasing higher education costs. For the purpose of this analysis, cost sharing is understood as the combined contribution from public and private sources in the financing of higher education. Higher education costs will be simply referred to as costs throughout the analysis, unless specified otherwise. The term costs refers to the costs of providing higher education, whether these are covered by public or private sources. Plotting each indicator and observing that there is a combination of public expenditure as well as Higher Education Institutions (HEI) income from private sources for each country allows verifying the existence of cost sharing. In order to identify patterns and potential typologies, public expenditure can be graphed against percentage income from private sources as a scatter plot. Although these two indicators are independent of each other, such a representation will demonstrate the extent to which HEIs are financed through public and private sources. It should be noted that other funding sources that do not fall strictly under the label of public or private as defined by Eurostat/Eurostudent (2009) may also exist, therefore the analysis does not necessarily provide a rigorous account of all potential Higher Education (HE) funding sources. This analysis will investigate HEI income from public sources (in the form of annual public expenditure) against HEI income from private sources (as a percentage of overall income from public and private sources. Although a general pattern is difficult to observe, a regional pattern does begin to emerge (explained below). Chart 1: Total Higher Education expenditure compared to HEI income from private sources Total higher education expenditure per full-time equivalent, including research & ancillary services (Eur PPS) Type 1 Denmark Germany Malta Cyprus Iceland Type 4 Mean United Kingdom Italy Czech Republic Hungary Poland Croatia Type 2 Type 3 HEI income from private sources (% of total income) Latvia From the graph it can be observed that the majority of countries fall into either type 1 or type 3. Therefore, in general, in countries that allocate more resources per student there is a weaker dependence on private contributions, whereas in countries that allocate fewer resources per student there is a stronger dependence on private contributions. Nonetheless, a combination of public and private contributions is apparent in all countries in the graph, confirming that all countries use cost sharing. Furthermore, a broad regional pattern emerges, as the majority of countries above mean total public expenditure per FTE (types 1 and 2) are located in Northern and/or Western Europe (excluding, Cyprus and Malta), whereas the majority of countries below mean total public expenditure per FTE (types 3 and 4) are in Central and Eastern Europe, including the Balkans (with the exception of Italy and ).

3 f u n d i n g f o r u m F i n a n c i n g t h e S t u d e n t s F u t u r e Most countries of the former Eastern Bloc are type 3, whereas the older Western democracies, particularly those with a social-democratic tradition, are type 1. This raises questions about how the political system shapes the HE financing system. Although beyond the scope of the FINST project, further research into this question may elicit interesting results. Only two countries fall into the type 2 category: the United Kingdom and Cyprus. In Cyprus approximately 65% of students are enrolled in fee-paying independent private institutions (Eurostat/Eurostudent 2009, p. 84). In the UK, HEIs charged a flat rate of 1175 per year of undergraduate studies in 2005, in addition to income received from public sources. It is important to note that for the 2006/2007 academic year this fee increased to a flat rate of just over and has further increased to up to since 2011/2012. Hypothesis 2: Higher education systems that have higher fees also have higher levels of public student support. The general idea behind this hypothesis is that higher education systems that acquire more private investment from students, offer more public support at the same time in order to level the expenses made by students and their families. In order to test the hypothesis, two indicators have been chosen: Indicator A: HEIs income from private sources (households & other private) as a percentage of all public and private sources Indicator B: Public financial aid as grants to tertiary students as a percentage of public expenditure on tertiary education. Chart 2: HEIs income from private sources (household & other) as a percentage of all public and private funding sources, ISCED % 50% 40% 30% 20% 10% 0% 3% 8% 9% 9% 7% 4% 35% 36% 30% 30% 32%33% 26% 22% 22%22% 23%23% 19% 12% 15% 16%16% 42% 44% Denmark Malta Iceland Germany Czech Republic Hungary Poland Italy United Kingdom Latvia Cyprus 52% Source: Eurostat, Bologna Process in HE, Study Framework, Statistical Table B.2a,b This can mostly be explained by the fact that all or part of the student population in most of these countries does not have to pay tuition fees (with exceptions such as part-time or international students). At the same time, in and Iceland, all students have to pay fees. At the other extreme end we see Cyprus, Latvia and, where almost half of HEIs income comes from private funding. The average for these countries observed is 23%. Looking at the relevance of grants as public financial aid to students in Chart 2, we also see a very different situation for various countries. Once again, Cyprus is an extreme case with almost half of the public expenditure for higher education spent on grants for students. This can be explained by the fact that, in Cyprus, all students receive basic grants and there are several different grants for different types of students as well (merit-based and needs-based). 3

4 Chart 3: Public financial aid as grants to tertiary students as a percentage of public expenditure on tertiary education 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 49% 30% 26% 24% 17% 17% 17%17% 16% 15% 15% 14% 12% 12% 11% 10% 9% 9% 8% 8% 8% 7% 6% 6% 1% 0% Cyprus Malta Denmark Italy Hungary Germany Latvia United Kingdom Czech Republic Poland Iceland Source: Eurostat, Bologna Process in HE, Study Framework, Statistical Table B.2c Malta, Denmark and also seem to have higher shares of public investment dedicated to grants for students, but most of the countries observed are rather close to the average, which is 14% among these countries. At the other extreme end though, in Iceland and Poland, the public aid to students in the form of grants is basically non-existent in the total public expenditure on higher education. For Iceland this can be explained by the fact that there is no grant system and public support is given only in the form of loans. To test the hypothesis, the countries were divided into two groups for both of the indicators based on the average percentage for the countries observed. This means that all the countries where HEIs income from private sources is less than 23% of all public expenditure, fall into the group low, and countries, where this indicator is higher than 23% fall into the group high. The same applies to public financial aid as grants countries where this indicator is less than 14% of public expenditure form group low, and countries with more than 14% of public expenditure on tertiary education used for grants form the group high. Putting these groups together into one table results in the groupings of countries shown in Table 1. Table 1. Groupings of countries based on the indicators observed Public financial aid as grants to tertiary students as a % of public expenditure on tertiary education Low High HEI s income of private sources (households & other private) as a % of all public and private sources Low High Group A: Iceland,,, Czech Republic,, Group B:, Poland,,, UK,,, Latvia Group C: Denmark,,, Malta,, Germany,, Hungary Group D:, Italy,, Cyprus 4 As seen from the table, most of the countries observed fall into groups where one of the indicators is low and the other one high: there are eight different countries in Group B, where HEIs income from private sources is rather high, but public financial aid as grants is rather low. This means that in countries like, Poland,,

5 f u n d i n g f o r u m F i n a n c i n g t h e S t u d e n t s F u t u r e, the UK and others, there is a high dependency on private investments in higher education. This may mean that students have to pay quite extensive tuition and other fees, but at the same time they get little non-repayable public support from the government. there are also eight different countries in Group C, where HEIs income from private sources is rather low, but at the same time public financial aid as grants as a percentage of total expenditure on higher education is rather high. This means that in countries like Denmark,,, Malta and others, higher education systems rely little on private sources, which may, to a large extent, mean that fees are very low or non-existent. At the same time, students in these countries receive extensive non-repayable support from the state. then there are six different countries in Group A, where both HEIs income from private sources and the relevance of public financial aid to students are rather low. This means that in countries like,, Iceland, the and others, higher education systems do not get much income from private sources, which might also mean that they do not rely on students private contributions that much. But at the same time, public aid to students in the form of non-repayable grants is not the priority of the expenditure on higher education. total expenditure on higher education, which might mean that these high contributions made by students could be levelled by extensive non-repayable support. Testing this hypothesis by grouping the countries into typologies based on the indicators observed, it is clear that this hypothesis is not supported by the data, because in most of the countries observed 16 out of 26 one of the indicators is high and the other one is low. There are only four countries that have higher education systems with higher private financing level and higher public student support level at the same time; and then there are six countries, where both of these indicators are rather low. Hypothesis 3: In most of the countries observed, public support to the student per month is higher than the student s private contribution to HEIs per month. With this hypothesis, the intention is to test the relation between students private contributions to HEIs and the support students receive from the state. The indicators chosen are as follows: A) contribution to student s income by state sources as percentage of students total income 2 the smallest is the Group D with only four countries, where both indicators are high. This means that in countries like, Italy, Cyprus and, higher education systems rely heavily on private sources, which might mean that students private contributions are relatively high in these countries. But at the same time, public financial aid to students in the form of grants also plays an important role in the B) Student s expenditure on tuition and other fees as a percentage of total main expenditure components 3 After eliminating all the countries where data could not be found or where data was not consistent with other indicators, a set of 17 countries was tested. The following charts show the selected countries and the corresponding indicators in percentages. Chart 4: Contribution to student s income by state sources as percentage of student s total income Czech Switzerland 2 Eurostudent, social & economic indicators of Student life in Europe , Fig 5.6: Contribution of individual income sources to total student income in % 3 Eurostudent, social & economic indicators of student life in Europe , Fig 6.5: Main components of total expenditures (students maintaining own households) 5

6 Chart 5: Student s expenditure on tuition and other fees as a percentage of total main expenditure components In order to test the hypothesis, the expenditures of total income on tuition and other fees were subtracted from the amount of state support to total student income. When reordering the results in an ascending manner, it becomes obvious that the hypothesis has to be rejected. In seven out of 17 countries, the state support does not Czech Switzerland cover or just barely covers tuition fees. As the indicators are average numbers, this result might not be correct for the individual student. In some of the countries invalidating the hypothesis, the state support may be significantly higher than the tuition fees for some students. The data does not allow further differentiation though. Chart 6: Contribution to student s income by state sources student s expenditure on tuition and other fees Hypothesis 4: In most of the countries observed, levels of public investment correlate with levels of participation. The last hypothesis posed even a bigger challenge when trying to find the proper testing indicators. In the end, it was decided to test the percentage of the whole population of the country that are students against annual public investment allocated to tertiary education as a percentage of total public expenditure. When analysing data by percentage of total public expenditure and as a percentage of GDP, it is clear that there is no correlation between public investment and total participation in tertiary education. However, interestingly, when the outlier is removed, a clearer correlation becomes apparent when comparing as a percentage of total public investment and as a percentage of total GDP. Czech Switzerland Interestingly, it seems that the Scandinavian countries are all grouped fairly closely together. With the exception of Iceland, there is no tuition fee in these countries. However, whilst these countries are grouped closely together, and in general, have higher public investment that is used towards free tuition, the correlation is not perfect, and so there are others with lower investment but higher participation. Countries of particular interest for further investigation are the countries that have lower-than-average public investment but higher-than-average participation, Poland, Latvia and. It will be interesting to see if there are any parallels between the way in which these countries choose to invest in higher education through making tuition free to the student, by investing in infrastructure or by investing in teaching and research for example.

7 f u n d i n g f o r u m F i n a n c i n g t h e S t u d e n t s F u t u r e Chart 7: Percentage of total population which are students, compared to annual public investment allocated to tertiary education 7.00 % of total population who are students Poland Latvia Iceland Hungary Denmark UK Czech Republic Italy Switzerland Germany Malta Norway Annual public investment allocated to tertiary education as % of total public expenditure Conclusions From our research, we have concluded that most European countries are using some form of cost sharing. In general, in countries that allocate more resources per student there is a weaker dependence on private contributions, whereas in countries that allocate fewer resources per student there is a stronger dependence on private contributions. Nonetheless, a combination of public and private contributions is apparent in all countries we have observed, confirming the fact that all countries indeed use cost sharing. We have also observed increased cost sharing, or shifting the burden of study costs to students in various forms, from increasing tuition fees to decreasing grants or converting grants into loans. Graduate and student contributions are replacing public funds, which can have negative effects for instance for those who come from a low socio-economic background. The shift from grants to loans is expected to affect retention and modes of study and possibly leading to increased dropout rates and a shift towards increasing parttime study (which can, to some extent, already be observed in the UK). In the last fifty years, there has been a significant increase in the number of students across Europe. This increase can also be observed on a shorter timeline, for example, Eurostudent/ Eurostat 2009 has shown that in half of the Bologna countries there has been an increase of more than 10% in student population between 2003/2004 and 2008/2009. The rise in the student population (massification) has not been followed by a rise in public funding, quite the opposite in fact; in the last few years the level of public funding has been declining (in certain countries there have been cuts close to 50% in the overall budget for higher education institutions). What we are seeing here is a funding gap that is widening and will have to be addressed soon; otherwise it can have a very negative effect on both accessibility and quality of higher education. What the European Students Union would particularly like to point out is that the discussion on financing higher education is not only a question of financing higher education institutions or tuition fees, but is also a question of student support which needs to be taken into account when discussing financing on various levels. In order to approach the financing and outcomes of higher education in a holistic manner, the students wellbeing and how it is supported must stand at the core of financing higher education but is still often overlooked. The question we were constantly faced with during the FINST project was what the terms public good and public responsibility really meant and how they were interpreted in different countries. In the EHEA, there are several countries with a high level of student support and no tuition fees as well as some with no or low level of student support and high tuition fees. Our research has shown that the diversity of the levels of certain indicators on student support and tuition fees is very high, although it is very hard to compare such diverse systems as we have in Europe. In general we have observed that there is a need for a European discussion about financing higher education in order to come at least 7

8 a little closer to a common understanding. Adding to that, the finding of the project was also that students would like to play a bigger part in the debates about financing higher education. Wider access and increased participation in higher education can only be achieved through applying adequate funding and policy making which result in educational and funding systems that take the social dimension into account. At the moment the funding systems most often do not reflect the current needs of those trying to access higher education nor provide adequate support during one s course of studies. Comprehensive data on the funding systems impact on the social dimension is still non-existent as there is not yet information for example on the impact of different funding models on dropout rates. Due to the budget cuts that higher education has been subject to in Europe, it is inevitable that equal access and support mechanisms are also affected, which in the long run will have negative effects on society. Policy development and changes in the financing of educational systems are highly relevant for a society s future development because ensuring the availability of higher education on an equal basis contributes to the economic growth of a society. Rok Primožič, Member of the Executive Committee, European Students Union Rok Primožič is a member of the Executive Committee of the European Students Union (ESU). He has a Bachelor s degree in Law and is currently studying Economics at the University of Ljubljana in. Before his current position with ESU, Rok Primožič was a student representative for more than four years. He has mainly been active in his country of origin,, where he was the president of the n Student Union (ŠOS). He is primarily in charge of topics related to the financing of higher education and the issues of European mobility and recognition. He also acts as the coordinator of one of ESU s flagship projects Financing the Students Future (FiNST). ESU is the umbrella organisation of 45 National Unions of Students (NUS) from 38 countries. It advocates and represents the educational, social and economical interests of students at European level. the project European Universities Forum for Financial Sustainability (EUFFINS, no ) has been funded with support from the European Commission. 8 This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.