Special report: Universities

Source: Economist, Vol. 414 no. 8931, March 28, 2015

Privatisation
Mix and match
Both provision and funding of higher education is shifting towards the private sector…

…In most European countries the state pays 80-100% of the costs of tuition. The main advantages of this model are equity and cost control. Where it works well—in northern Europe—graduate education levels are uniformly high. Where it works badly—in southern Europe—they are uniformly low. American uses mixed funding, with individuals paying most of the costs of tuition and the government helping out with loans and grants. In some countries with similar models, such as Japan and South Korea, individuals and families pick up the tab. These systems tend to be better funded and more expensive than the European ones (see chart 4) because people fork out readily, and costs are harder to control…. Another option is to make individuals pay more. In America, retrenchment in state budgets has pushed up tuition fees. In California, for instance, they have tripled over 15 years, and a further 28% rise is proposed. Outside America, the first big shift towards private funding happened in Australia, where tuition fees were jacked up in the late 1980s. A host of other countries followed, including New Zealand, Chile, South Africa, some of the former Soviet republics, Britain and Thailand…. Another source of private funds for universities is philanthropy. Endowments at some American universities dwarf income from fees….

….The biggest provider of higher education that nobody has ever heard of is Laureate, an American for-profit education company with revenues of $4 billion, nearly 1m students and 70,000 staff. It does not promote its brand because it prefers to be known through the names of the 80-plus universities and colleges it owns all over the world….