Paying to Learn

In 2005, the Federal Constitutional Court of Germany ruled that individual states had the power to charge fees for university. This ruling overturned the former policy of free higher education, a measure that has been in place in Germany since 1970. Two years after the fees were implemented, the issue still polarizes students, faculty and government officials.

Those in support of student fees argued that the step was necessary in order to raise the overall standards of higher education and to make Germany’s universities more competitive with the rest of the world. Certainly, something needed to be done. The German university system had reached a moment of crisis. Humboldt University, in Berlin, had been the home of 29 Nobel Prize Winners; Einstein and Hegel lectured there; Marx, Heine and the Grimm Brothers were students. But facing dire funding shortages, the university was forced to reduce its budget significantly, cutting jobs for faculty and closing off all enrollment for the winter semester of 2003-2004. Berlin’s Freie Universität limited its acceptance of students to only the top percentage of applicants. Other universities were required to drop certain “non-essential” programs in order to meet budget shortfalls.

The German education system faced a lose-lose situation. When the three main Berlin Universities cut their budgets by €200 million over 4 years, thousands of students took to the streets to protest. But when the state moved to adopt tuition fees in order to meet budget demands that the students requested, there were yet more protests.

The principle argument against the fees is that they are seen as limiting access to education, particularly among the poorest segment of society. Others see it as a dangerous precedent: once fees are allowed, there is little that can stop them from rising, so that even a minimal fee threatens to expand over time into a cost that restricts greater segments of the population. Furthermore, tuition presents an added financial burden for students, who may then be required to work part-time jobs or increase the number of hours that they work – all in order to afford school.

But this fundamental assumption – that fees restrict access to education – may be flawed. Consider the German university system as a simple equation in which free education equals less money for universities; then following this formula, less money leads to lower quality (lack of resources, overcrowded classrooms, poorly-paid professors), which then leads to less general satisfaction earned from the education, less benefits, less value. The best professors follow the higher salaries and prestige to universities outside Germany. A higher percentage of students seek their education abroad. Budgets are cut, programs are dropped. And then consider that in Germany the average student costs the university €8,500 annually. So one easy way to limit costs: limit students.

Free education also shapes perception. People perceive objects that have greater cost as being more valuable. Something that is free is seen as disposable, not worth so much, perhaps even unnecessary. But if a person must pay for this thing then it becomes an investment. When university costs something more, then it has a tendency to mean something more. Education becomes an investment, not a gift.

All of this contributes to an environment in which no-fee education had actually reduced access to education. According to the Organization for Economic Cooperation and Development (OECD), 22 percent of Germans aged 24-34 have gained degrees from universities or comparable polytechnic colleges. In the United Kingdom, where students pay on average €4,300 per year, the percentage with similar degrees is 31 percent. In the United States, where annual tuition fees may be as high as $25,000, 39 percent have degrees. And while the number of people with degrees has risen in wealthy countries – from 20 to over 28 percent since 1991 – this percentage has remained virtually unchanged in Germany over the same time period.

University funding doesn’t only come from the government or from tuition fees. The private sector – comprised of individual donations, charitable gifts, corporate offering – provides another source of money. In this respect, universities in the United States have far outpaced the competition. The top ten university endowments in the world all belong to U.S. colleges. Oxford and Cambridge, in the U.K., arrive in the top twenty. German universities don’t even come close.

Of course, universities in the United States have spent decades enlarging and improving their fundraising mechanisms. By contrast, German universities lag far behind. “The problem is not the lack of public funding but rather a lack of commitment from the private sector”, says Michael Burda, a professor of economics at Humboldt University and a research fellow at the Center for Economic Policy Research. “This ambivalence reflects a lack of pressure on the universities to develop alternative financing options and underscores the working assumption that the government will always cover the operating deficit”.

Recently, however, German universities have begun to adapt. In addition to the newly-implemented tuition fees, Germany has set in motion a plan to create a system of elite universities. The idea, which began in 2004 under the directive of former Chancellor, Gerhard Schroeder, assessed the performance of universities across the country, with the incentive of giving €1.9 billion to the top schools in order to increase the competitiveness of specific universities on a global scale while attracting a higher caliber of students and faculty. In 2006, the first three elite universities were announced: the Ludwig-Maximilians-Universität, the Technical University (both located in Munich) and the Technical University of Karlsruhe. Some German universities have found other ways to use fees as an incentive for greater competition by creating a system in which top-performing students are exempted from paying fees. These academic scholarships reward the highest achievers while encouraging improvement from other students. And although fundraising is still low compared to international counterparts, there are signs of improvement. In November of 2006, Klaus Jacobs, a German-born billionaire, announced that he would donate €200 million to the International University Bremen – the biggest ever donation to a German university.

Change may be slow, but it is taking place. And although university may cost more as a result of these changes, it may be an investment that more Germans are willing to make.

Picture: © Lee Bacon, 2006