Financing in Higher Education: Increasing Access
August 24, 2011 – 3:45 p.m.
||Bruce Johnstone, State University of New York, Buffalo
Garth Willis, USAID Office of Education
Al Jaegar, Putera Sampoerna Foundation of Indonesia
||Suezan Lee, USAID Office of Education
Suezan Lee of USAID’s Office of Education opened the session with a discussion of combining public and private financing in an effort to increase access to higher education in host countries. Bruce Johnstone from SUNY Buffalo presented an overview of the components of public financing and the changes that have recently occurred. He pointed out that financing in higher education has shifted from public financing to private financing and, essentially, the privatization of a public sector function. This emerged because of the increase in demand for higher education, accelerated by increases in enrollment, and an increase in youth cohorts and participation. The associated problem with this shift is the inability of the government to keep pace with increased demand as there are other competing priorities for the government, such as public health and public infrastructure. Johnstone briefly discussed a range of alternate financing sources, namely non-governmental revenues, philanthropic funding, and cost-sharing. Deferred payments, student loans and cost-sharing mechanisms were a few of the proposed means of increasing access to higher education.
Garth Willis, also from the Office of Education, shared an example from Kyrgyzstan where a student loans model was implemented successfully, receiving public support and recognition from the government and International community. The model recognized the importance of student loans and identified the problem faced by educational institution’s lack of knowledge to process such loans. Lessons learned from past experience where student loans models failed to indicate that these loans were used as scholarships or grant money and did not have a well established repayment mechanism in place. The model in Kyrgyzstan includes a provision for external technical assistance to educational institutions for processing student loans. The Kyrgyz Investment and Credit Bank and the Financial Group Kompanion, two public Kyrgyz financial companies, are directly involved in the project. According to the agreement signed, the Bank is responsible for loans pertaining to Higher Education programs and the Kompanion for vocational programs. USAID also guaranteed 50% of the losses incurred through defaulted loans to the Bank. The initial skepticism about the model and the program led to high interest rates on student loans, which have since dropped considerably.
Al Jaeger, Placement and Partnership Director from Putera Sampoerna Foundation of Indonesia shared a success story of a project providing access to higher education. He explained how this model enables greater access to higher education based on merit. Indonesia’s higher education institutions are generally exclusive and expensive. The Sampoerna Foundation’s program established a cooperative for the brightest of disadvantaged students, which provides comprehensive support to students, including student loans and pre-negotiated provisional subsidized tuition fees in overseas universities. The Foundation has stringent review and selection processes for enrollment that have contributed to the success of this initiative.
Key take away points include the shift in financing higher education from the public sector to private individuals and organizations, brought on in part by increasing enrollment. Other financing sources including NGOs should be examined as possible funders. Two case studies, one featuring a student loan program and another, a student cooperative, presented alternative financing mechanisms based on merit.