Getting privatization right in higher education

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As I blogged about not too long ago, public universities around the world are facing serious pressures due to the financial crisis. Perhaps the moment is ripe for reform—when the fiscal situation gets tough, it can help make possible what only recently seemed unimaginable. Emerging economies would do well to take advantage of the moment and carry out reforms that address not only the immediate pressures arising from the financial crisis but the longer-term issues that have built up in higher education over the last two decades.

A publication by the Institute for Higher Education Policy (Full disclosure: I am a former employee of  IHEP) takes the bull by the horns on this one. Privatization in Higher Education: Cross-Country Analysis of Trends, Policies, Problems, and Solutions lays out the problems that many countries are grappling with:

The development of private higher education and the introduction of cost-sharing at state institutions in many countries have led to an unprecedented increase in the number of students who have to pay their own tuition, as well as other costs of higher education. About 50 percent of students in Ukraine, 73 percent of students in Brazil, and most students in Mongolia pay for their higher education. Student financial aid in these countries has been disproportionately granted to students studying at state institutions. These students are eligible for tuition waivers, state scholarships, grants, state-subsidized loans, and other types of support. Meanwhile, students in private institutions are often left on their own, irrespective of their academic abilities or ability to pay.

In other words, the privatization of higher education has been no panacea for middle-income countries faced with unprecedented increases in demand for access to higher education. Rather, governments have typically been unable to cope with the new demand and so have let private institutions fill in the gaps, for better or worse. The result is often a sharply divided two-tier system: public education provided to the well-off at no charge and private education catering to the aspiring middle classes at full cost. This is not the way anyone would plan out a system, since it serves neither the goals of efficiency or equity, but it is what many countries are currently stuck with.

Brazil is perhaps the prototypical example of this kind of system. The IHEP authors explain:

...access to public higher education is limited for large groups of the population—especially those from less affluent families—because entrance exams are used to control the number of students in the more selective public institutions. Although students from low-income families are more likely to attend private sector institutions, many lack access to the resources that would help them succeed on these exams.

So how can this situation be fixed? The key recommendation of the authors is to permit private institutions to participate in national student loan and grant programs. This could be coupled (although the authors are more tentative about this) with the elimination of free public higher education. In many countries, the mere mention of this possibility is tantamount to blasphemy. But I think it makes a lot of sense—charge well-off students to attend public institutions, and direct state subsidies to those who need it most (and who are often attending private institutions).

Hopefully, leaders in emerging economies will take some sage advice given in a slightly different context:  "never waste a good crisis."   


Ryan Hahn

Operations Officer

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