March 2008 · Number 117 44687 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region. Accessibility and Affordability of Tertiary Education in Brazil, Colombia, Mexico and Peru within a Global Context Yuki Murakami and Andreas Blom In the past two decades, countries in Latin America and Mexico, affordability and lack of financing seem to be the Caribbean (LAC) liberalized their economy. Together the main obstacles for families. with technological advances and increased globalization, this policy has increased demand for knowledge and Surprisingly, we hardly know how affordable tertiary workers with tertiary education. education is in Latin America compared within a re- gional and global context. We know that Latin Ameri- LAC governments also have increased investments in can countries differ in their policies on tertiary educa- education in the last two decades, for children of low- tion finance. Some have tuition in public institutions, income families. As a result, graduation rates of primary others not. Some promote non-governmental tertiary and secondary education improved sig- education with full tuition, others nificantly. This increased the demand frown of non-governmental educa- for tertiary education. tion. Some run large student assistance programs, others administer smaller As a consequence, the rate of enroll- programs. However, we do not know ment in tertiary education in LAC has how these differences affect afford- increased annually by 2 percent since ability and access for the students. Of- 1985. In LAC countries, such as Argen- ten, discussion of financing of tertiary tina, Chile, Colombia and Mexico, pub- education is limited to an ideologically lic and non-governmental universities driven debate for or against tuition in expanded and diversified to absorb some public universities. Nevertheless, fi- of the increased pool of qualified stu- nancing of tertiary education is more dents from secondary education. How- than a discussion of the tuition level ever, LAC countries continue to trail of public tertiary education. One needs high-income countries in terms of en- to analyze a comprehensive set of fac- rollment. In 2003, the tertiary education tors when analyzing tertiary education enrollment rate in high-income countries finance. was about 62 percent compared to 26 percent for LAC countries. The goal of a recently released Work- ing Paper1 is to estimate affordability What triggers a comparatively low enrollment rate in and accessibility of tertiary education2 in selected Latin LAC? The main factors seem to be: (i) affordability and American countries. This seeks to provide more objec- lack of financing of tertiary education, (ii) insufficient tive information for policymakers. Also, the analysis and unequal access to secondary education, (iii) the enables us to better understand the impact of student lack of information, and (iv) low expectations of attend- assistance policies for increased enrollment. Especially, ing tertiary education among youth from low-income this paper seeks to answer the following research ques- families. Based on surveys of families in Colombia and tions: · What are the costs of tertiary education to Latin bility of data is required to reach more reliable results. American families? · How important are living costs for tertiary education? Main Findings · Is financial aid improving affordability of tertiary education at the national level? Affordability of tertiary education in LAC is low com- pared to high-income countries. The paper analyzes This is the first attempt to compare affordability of education costs, living costs and student assistance ex- tertiary education across Latin American countries. A pressed as a share of GDP per capita, a measure of abil- series of studies looks at how much governments and ity to pay. countries invest in tertiary education. Very few studies examine the costs for the individual student. None of Education costs (tuition and other fees) and Living cost these compare costs internationally. The paper takes are twice as high in he analyzed Latin American coun- into account not only the direct costs of education such tries compared to high-income countries, 64 percent for as tuition, fees and other costs, but also financial aid to LAC countries compared to 30 percent for high-income students. Further, the paper compares across countries. countries (See Figure 1). The paper follows the methodology of Usher and Cer- Living costs are a significant cost of tertiary educa- venan (2005) "Global Higher Education Rankings: tion. The cost of living is estimated to 29 percent of Affordability and Accessibility in Comparative Per- GDP per capita for the typical Latin American family. spective". This enables an international comparison of This compares to 19 percent for high-income countries. our findings for Latin American countries. To measure affordability of tertiary education, we estimate educa- There is a relatively low level of student assistance in tion costs (tuition and other fees), living costs (living Latin America (see Figure 2). In the four examined Latin space and food), grants, and loans. These elements are American countries, Brazil, Colombia, Mexico and Peru, incorporated into four different affordability indica- student assistance--loans and scholarships--amounted to tors: education costs, total costs, net costs, and out-of- four percent of GDP per capita, divided into two percent pocket costs. To measure accessibility of tertiary edu- for loans and two percent for grants. This compares to cation, we compute four indicators: participation rates, nine percent for high-income countries (and 22 percent educational attainment, educational equality index and for Anglo-Saxon countries and 15 percent for Northern gender parity. Europe). Brazil, Colombia, Mexico and Peru were chosen for Overall, the average family in Latin America pays the the analysis for the following four reasons: (i) they rep- equivalent of 60 percent of GDP per capita for tertiary resent 66 percent of the region's population, (ii) they education in LAC. It compares to 19 percent for fami- represent relatively different approaches to financing lies in high-income countries. This is the out-of-pocket tertiary education, (iii) information and data could be costs, which is calculated as the education and living costs collected to a minimally acceptable degree, and (iv) the less the student assistance. The difference between Latin World Bank has on-going policy dialogue with these America and high-income countries is explained by the countries within tertiary education. A broader selection difference in GDP per capita, higher costs of education of countries would have enriched the study and make it due to a more predominant share of private education in more representative of the entire region if information Latin America, and a low level of student assistance. was available. There is relatively low access to tertiary education. Our Unfortunately, the study relies on different sources of estimation confirms existing evidence of a relatively data,inparticularfortuitioncosts.Thesourcesfortuition low accessibility to tertiary education in Latin America, are administrative data, household survey data, and in- measured by both quantity (participation rates and attain- stitutional websites. The paper recognizes the criticism ment rates) and equity (socio-economic). However, Latin of comparing apple with oranges, and recommends that America is the best region when it comes to equal access the findings be treated as indicative. Higher compara- for females and males. 2 · March 2008 · Number 117 Belgium (Flemish) tion, and few countries have sufficient Ireland student assistance to compensate for Belgium (French) the higher costs. More reliable and Finland Figure 1 - Education and Living Costs Netherlands disaggregated analysis would provide Germany relevant information that could in- Sw eden Mexico form policies for admission, potential Italy cost-recovery and student assistance Austria France Education High Income Average Living POLiCY iMPLiCaTiOns Canada Australia Average The above findings show that the United States United Kingdom Latin American countries examined Japan in the study finance tertiary educa- New Zealand tion in a different and unique way LAC Average Colombia compared to high-income countries. Brazil In Latin America, there is a relatively Peru large private sector with high educa- 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 tion costs, a smaller, low-cost public % GDP per capita sector, and relatively little student There is not necessarily a simple relationship between af- assistance. This contrasts with: (i) the fordability of tertiary education and accessibility. Hence, Anglo-Saxon model of financing, which features relative- high affordability to the families does not necessar- ly high education costs together with a large student as- ily lead to high access. This is likely to be the case for sistance program, and (ii) the European model with low low-income families, where even living costs presents a education costs and a modest level of student assistance. barrier to access. However, this may not be the case for Further, the study shows that there are important differ- middle and high-income families. This is explained by ences within Latin America. Policies therefore have to be the fact that if the families do not contribute to part of the tailored to each country. The differences and the lack of costs, the government has to shoulder the full costs, and reliable information also highlight the need to undertake this tends to limit available supply of higher education. more data collection and research before designing poli- cies. The findings presented in the study could be improved and extended United States Sw eden in at least three ways: (i) the data United Kingdom on tuition levels and other educa- New Zealand Australia tion costs could be improved, in Netherlands Colombia particular for Brazil and Peru, (ii) Finland the analysis could be expanded to High Income Average Canada other Latin American countries, Average and (iii) the affordability analy- Japan Figure 2 - Student Assistance France sis could be undertaken separately LAC Average (Grants and Loans) for students in public and non- Ireland Austria governmental institutions, and also Germany Mexico separately for students from low-in- Italy Grants come families compared to students Belgium(French) Belgium(Flemish) Loan from high-income families. The Peru costs of private higher education Brazil in Latin America is dramatically 0% 5% 10% 15% 20% 25% 30% higher than public higher educa- March 2008 · Number 117 · The first implication that we draw from the analysis Following public debate, a successful scaling up of is a requirement to take a comprehensive approach student assistance programs and a comprehensive re- to tertiary education financing. Education and living view of tertiary education financing policies would costs, public financing of tertiary education, student enable government and families in Latin America to assistance and other financing policies should be ex- increase access to tertiary education for many more amined together. Tertiary education finance is more students. This would enhance the productivity, cre- than only the issue of cost-recovery of public univer- ativity, innovativeness, and technological capacity of sities. Further, it is should be well-known that high the national labor force, and thereby boost economic affordability does not necessarily lead to high access, growth, national competitiveness, and poverty reduc- because if the families are not contributing to the in- tion. vestment in tertiary education, the government has to foot the entire bill. Without a high level of tax contri- butions, government budget is insufficient to finance a broad section of the qualified students, and is inequi- table in many cases. The second policy implication is that governments in Latin America have an opportunity to improve affordability of tertiary education through increased student assistance. By doing so, the governments would help families finance the relatively high costs of tertiary education and thereby increase enrollment and equity. This could be done by: · Expand availability of student loans. Student loans allow students to postpone the costs of tertiary educa- tion, so that costs--the loan repayments--coincide with the benefits of tertiary education--employment nOTEs and higher salary. Student loans hold considerable 1 Extracted from "Accessibility and Affordability of promise in Latin America, because the costs of educa- Tertiary Education in Brazil, Colombia, Mexico and tion are relatively large and prohibit many families Peru within a Global Context", by Yuki Murakami and from accessing tertiary education. Loans help low, Andreas Blom, World Bank, Policy Research Working middle, and high-income families finance tertiary Paper, WPS4517, February 2008, Obtain the paper at education. Further, loans facilitate student-contribu- http://econ.worldbank.org/docsearch. tions to investments in tertiary education, and thereby contribute to higher investment in tertiary education. 2 -The Working Paper uses the methodology developed by Usher and Cervenan,.2005. See Usher, A., Cervenan, · Expand availability of grants (or income-contingent A., 2005. Global Higher Education Rankings 2005. Edu- loans) to students from poor families to cover living cational Policy Institute, Toronto, ON. costs. For many low-income families, free education is not enough of a subsidy to finance access to tertiary education. Living costs need to be covered. Most Latin American countries have large, targeted grant about the authors programs, in particular Mexico and Colombia. An Yuki Murakami is an Extended Term Consultant with the income-contingent loan program would be the most Education Group of the Human Development Department cost-efficient way of assisting low-income families in the Latin America and the Caribbean Region of the World Bank. Andreas Blom is a Senior Education Economist in gain access to tertiary education. the Human Development Department of the South Asia Region "en breve" is produced by the Knowledge and Learning Team of the Operations Services Department of the Latin America and the Caribbean Region of the World Bank - http://www.worldbank.org/lac · March 2008 · Number 117