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Funding the future: is university education worth the investment?

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Raising $30 million in just three months is a fundraising effort any charity would be proud of.

 

Brown University, one of the leading Ivy League universities in the US, did just that after announcing that it wanted to end student loans and offer scholarships instead.

 

The amount of money donated by over 2,000 former students speaks volumes about the value of tertiary education to those who have benefited from it.

 

“The response so far to The Brown Promise has been nothing short of phenomenal,” said Brown President Christina Paxson in a statement. “This initiative takes financial aid at the University to the next level, helping us do more for moderate-income students and families. It amplifies our commitment to bringing the best and brightest students to Brown, regardless of their socioeconomic background.”

 

And therein lies the problem – while it still pays to study, some people are not able to afford the cost of doing so, and governments are not always able or willing to subsidize education.

 

To charge or not to charge?

 

Despite the cost, the demand for education around the world is continuing to grow, and tertiary education is becoming the norm. For example, in Korea, Canada, Russia and the UK, more than 50% of people aged 25-34 now go on to study at University.

 

But there is huge disparity between tuition fees in different countries. Around a third of OECD countries do not charge fees at bachelor’s degree or equivalent level. But according to data from the OECD’s Education at a Glance report, the United States, Australia, Canada, Chile, Japan and South Korea all have annual tuition fees higher than $4,000.

The US has the highest average annual tuition fees of any country worldwide at $8,200 a year for public institutions. The equivalent fees in Spain, Italy and Portugal are all below $2,000 a year.

Meanwhile, students in some Scandinavian countries are paid to go to university, receiving wages from the state while they study. Many Danish students living away from home are entitled to $1050 a month to help with their living costs.

Maintaining standards

How much a country can afford to subsidize education is heavily dependent on both the number and the proportion of its young people going to university. This can be as high as 50% in some western countries but is much lower in Germany where there is a strong emphasis on vocational training.

In fact, Germany managed to abolish tuition fees altogether in 2014, even for international students.  Company schemes which pay students a salary whilst they study are also very popular in Germany. They combine practical training in the workplace with terms spent in a college environment.

However, a lack of tuition fees can be counterproductive if there is not adequate investment from governments. When this happens, universities run the risk of not being able to maintain high-quality courses with a good ratio of teachers to students.

Critics of the decision to abolish tuition fees in Germany point out that the most talented students and professors head to elite universities elsewhere. Germany’s top university, LMU Munich, only makes it to 30th place on the Times Higher Education List of the world’s best universities. This, some argue, is at least partly due to the amount of investment that German institutions receive.

Countrywide benefits

The benefits of a university education to an individual are clear: Adults with a tertiary degree are 10 percentage points more likely to be employed and will earn 56% more on average than adults who have completed secondary education. 

But it is easy to forget that a university education also benefits a country as a whole.

High earners pay more tax. In addition, they are less likely to become a burden to the state as university graduates are much less likely to be unemployed or even fall victim to mental illnesses.

“Equitable and high-quality education fuels personal fulfilment as well as economic growth,” says the secretary-general of the OECD Angel Gurría. “It is the foundation for promoting development, reducing economic disparities and creating a society of inclusiveness.”

As a university education benefits the nation as much as it benefits the individual, it is crucial to make the right policy decisions to ensure universities have adequate funding. Only then can they sustain  high-value courses that send well-rounded graduates out into the workforce.

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