No. 46




Funding of Higher Education Studies from Students’ Perspective: How to Cover Living Expenses

14 December 2022


RiTo No. 46, 2022

Education is special. Sociologists of education have known this for a long time. This means that students from high socio-economic backgrounds are more likely to benefit from generously and universally funded education.

Although financing students is primarily an issue of educational equity, or access, the organisation of the financing of students is not without significance for universities either, since tuition fees (their size, who pays, and other organisational aspects) have an impact on the university’s revenue base, and student grants also do not operate without leaving their mark on the activities of universities. Student allowances have an impact on drop-out rates, on working during studies and on completion of studies in the nominal period, i.e., they have a direct impact on the so-called production process of universities.

We show that there are four worlds of financing of students, and Estonia is swaying between them – while low average tuition fees point to a Nordic orientation, low study allowances make us more like continental Europe. In this comparison, however, our needs-based study allowances remain very poor. Thus, it is necessary to make a political decision about where Estonia’s higher education system wants to belong. However, we must also consider the context, or the welfare state model we have chosen, in which education as a whole is generously publicly funded against a background of social spending, while state spending on primary, basic and secondary education takes precedence over higher education, and private funding is scarce in the system.

We recognise that if no more money is provided to the system, policymaking will have to focus on the issue of distribution, or to whom and how to distribute the scarce money. As long as students are legislatively de jure part of their families and de facto independent, there will be a contradiction. If the purse is not opened to support the students, or no money is added to the system, the options are to abolish performance-based support, to consider partial “defamilisation” and/or to make the distribution arrangements more efficient in order to reduce the transaction and agency costs of awarding bursaries, which may also be indirect and social in nature, for example encouraging the creation of fictitious families or reducing trust in state institutions. The alternative is to accept need-based intensive working of students, which is biased towards those with weaker background characteristics, thus penalising them with a higher risk of dropping out and postponing graduation.

Another option for financing students is to take a “private deal” approach, and create loan systems that support learning and tax the subsequent salary bonus. However, such an approach would require a major change of mindset and a reorientation of public funding, as well as of supervision and institutional support.