Tartu Ülikool

Analysis of the possible impact of changing the higher education funding system has been completed at the University of Tartu

An overview of the higher education funding models of different countries and the possible impact of changing the funding system for both students and society has been compiled at the University of Tartu, to provide evidence-based data for the public debate concerning the future system of higher education funding in Estonia. The analysis is based on scientific literature published over the last 20 years.

The number of people who go to study at universities has multiplied over the last decades and caused a need for extra finances to ensure that universities could continue to offer high-quality higher education. Countries and universities are facing the problem where to get the additional money, and if it came from the learners themselves, how it would be justified and how it would affect the students.

According to one of the authors of the literature review “Models of higher education funding and the possible impact of changing the funding system”, the University of Tartu Vice Rector for Academic Affairs Aune Valk, tuition-free higher education has considerable advantages and, in view of the approach in our neighbouring Nordic countries, would be the best choice for Estonia at present. However, it may not always be fair for all learners. “We can see that poorly financed tuition-free higher education, where allowances and loans are insufficient for students to live on, leads to a decline in both quality and access, reduces students’ commitment to studies and in the long term, damages the creation of the next generation of Estonian-language academics. After analysing the experience of different countries, when planning the future of higher education funding in Estonia we can consider aspects that have not yet been discussed in university funding debates. One possible approach is a state-guaranteed, income-contingent loan system, which makes an investment in higher education secure,” she said.

This system will be introduced at the discussion seminar on 28 April, where an online presentation is made by Nicholas Barr, British economist and Professor of Public Economics at the London School of Economics and Political Science, who has been called one of the architects of Britain's higher education funding system. At the seminar, Barr will talk about the income-contingent loan system and the lessons learnt from the financing of higher education, drawing on both economic theory and the experience of other countries.

“When presented with a coherent strategy, it is a sad fact that politicians often implement only the parts that they like and, as a result, the policy works badly. A small, coherent country like Estonia has a wonderful opportunity to take a holistic approach to financing higher education, to promote the quality of the system and to provide good access for students from all backgrounds, and in doing so to become a role model for other countries”, said Professor Barr. “Students rightly have high expectations about the quality of higher education and its benefits for their future lives – these things really matter for young people.”

The analysis describes the factors affecting access to higher education, with examples from different countries. For example, university education may remain inaccessible if studying is free of charge for the students but they do not have enough money to pay rent, buy food or learning materials, or cover travel expenses. But access is also restricted if, for example, learners have not received the necessary preparation for university at the previous level of education and they are not aware of the benefits of higher education due to their poorer socio-economic background. This is why various support measures are important from the aspect of access. Good examples highlighted in the analysis include Finland (tuition-free higher education) and the Netherlands (moderate tuition fees), where higher education is highly accessible for students from different socio-economic backgrounds.

The analysis finds that compared to the 32 education systems of Europe, public funding for higher education in 2008–2017 decreased the most in Estonia, in inflation-adjusted terms, to 23.3%, while the GDP increased. The fact that higher education funding has declined at the time when GDP is growing is seen as a sign that the state risks losing its opportunity to strengthen the knowledge-based society.

Read the full analysis (in Estonian) here.

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