On average, across OECD countries, educational institutions are mainly publicly funded, with government funds accounting for 90% at primary, secondary and post-secondary non-tertiary and 66% for tertiary education.
The share of private investment on tertiary educational institutions varies significantly across countries, mainly as a function of the tuition fees charged by tertiary institutions. Countries such as Colombia, Chile, Japan, the United Kingdom and the United States account for the largest shares (around 70%).
Public transfers to the private sector play an important role in the financing of tertiary education representing 5% of total funds across OECD countries. Australia, New Zealand and the United Kingdom are the countries with the highest public-to-private transfers (between 20% and 30% of the total funds devoted to tertiary educational institutions).
Education at a Glance 2018
Indicator C3. How much public and private investment on educational institutions is there?
Figure C3.1. Distribution of transfers and public and private expenditure on educational institutions (2015)
Note: International expenditure is aggregated with public expenditure for display purposes.
1. Net student loans rather than gross, thereby underestimating public transfers.
Countries and economies are ranked in descending order of the proportion of public-to-private transfers.
Source: OECD / UIS / Eurostat (2018), Table C3.2. See Source section for more information and Annex 3 for notes (http://dx.doiorg/10.1787/eag-2018-36-en).
Context
Today, more people than ever before are participating in a wide range of educational programmes offered by an increasing number of providers. As a result, increasingly more importance is accorded to the question of whether governments or the individuals themselves should support these efforts to acquire more education. In the current economic environment, many governments are finding it difficult to provide the necessary resources to support this increased demand for education through public funds alone. In addition, some policy makers assert that those who benefit the most from education, the individuals who receive it, should bear at least some of the costs. While public funding still represents a large part of countries’ investment in education, the role of private sources of funding is becoming increasingly prominent at some educational levels.
Public sources dominate much of the funding of non-tertiary levels, which are usually compulsory in most countries. Across OECD countries, the balance between public and private financing varies at pre-primary (see Indicator B2) and tertiary levels of education, as full or nearly full public funding is less common. At these levels, private funding comes mainly from households, raising concerns about equity in access to education. The debate is particularly intense over funding for tertiary education. Some stakeholders are concerned that the balance between public and private funding should not discourage potential students from entering tertiary education. Others believe that countries should significantly increase public support to students, while still others support efforts to increase the amount of funding to tertiary education provided by private enterprises.
This indicator examines the proportion of public, private and international funding allocated to educational institutions at different levels of education. It also breaks down private funding by households and expenditures by private entities other than households. It sheds some light on the widely debated issue of how the financing of educational institutions should be shared between public and private entities, particularly at the tertiary level. Finally, it looks at the relative share of public transfers provided to private institutions and individual students and their families to meet the costs of tertiary education.
Other findings
Households account for the largest share of private expenditure devoted to tertiary educational institutions (70% on average across OECD countries).
Between 2010 and 2015, the share of private sources of expenditure on educational institutions from primary to tertiary increased by 11%, while the share of public sources decreased by 1%, on average across OECD countries.
The share of private expenditure on educational institutions varies across non-tertiary education levels. At the primary and secondary levels, around 8% of expenditure on educational institutions comes from private sources. This share reaches 13% at upper secondary education.
Analysis
Public versus private expenditure on educational institutions
Educational institutions in OECD countries are mainly publicly funded, although private funding at the tertiary level is substantial. Within this overall average, however the share of public, private and international funding varies widely among countries.
On average across OECD countries, 83% of all funds for primary to tertiary educational institutions come directly from public sources (Table C3.1). In OECD countries, private funding on educational institutions represents on average 16% of all expenditure. Around half of the countries with data available report a share of private funding above the OECD average. In Finland, Luxembourg, Norway and Sweden, private funds constitute 3% or less of all educational expenditure. In contrast, private funds constitute around one-third of all educational expenditure in Australia, Chile, Colombia, Korea, the United Kingdom and the United States. International sources represent on average 1% of the expenditure on educational institutions, reaching around 4% in the Czech Republic, Greece and Portugal. In around 30% of all OECD and partner countries with data available, international sources exceed the OECD average,
Public versus private expenditure on non-tertiary educational institutions
Public funding dominates non-tertiary education in all countries. Around 9% of funding for these levels of education comes from private sources, and the share of private funding exceeds 20% in Colombia (Table C3.1 and Figure C3.2). In most countries, the largest share of private expenditure at these levels comes from households and goes mainly towards tuition fees.
The share of private expenditure on educational institutions varies across countries and according to the level of education (OECD, 2018[1]). At the primary level, on average, 7% of expenditure on educational institutions comes from private sources. In Finland, Norway and Sweden, all educational funding for this level is public, while in Chile (17%) and Colombia (24%) a large share of funding comes from private sources – the highest of all countries for which data are available (OECD, 2018[1]).
At the lower secondary level, private funding corresponds to 8% of total educational expenditure on average. In 23 of the 32 OECD countries for which data are available, public expenditure accounts for over 90% of the total. However, Australia and Colombia source just over 20% of expenditure from private sources at this level (OECD, 2018[1]).
Upper secondary education relies more on private funding than the primary and lower secondary levels, reaching an average of 13% across OECD countries. Private sources play a slightly stronger role in vocational programmes (contributing 14% of expenditure) than in general programmes (12%). In Germany, the Netherlands and New Zealand, vocational upper secondary education receives at least 25 percentage points more private funding than general education tracks. On the other hand, in Chile, Turkey and the United Kingdom the share of private funding in general programmes exceeds that of vocational programmes by 15 or more percentage points (OECD, 2018[1]).
The level of public funding in post-secondary non-tertiary education stands at only 75% on average. Unlike the three lower levels presented above, in post-secondary non-tertiary education, Israel, New Zealand, Poland and the United States rely more on private than public sources of funding (OECD, 2018[1]).
Public versus private expenditure on tertiary educational institutions
The high private returns to tertiary education (see Indicator A5) have led a number of countries to expect a higher financial contribution from the private sector to finance tertiary education, provided that financial support mechanisms are in place to support students from various economic backgrounds (see Indicator C5). In all countries, the proportion of private expenditure on education is far higher for tertiary education (an average of nearly 31% of total expenditure at this level) than it is at lower levels of education (Table C3.1 and Figure C3.2).
The proportion of expenditure on tertiary institutions covered by individuals, businesses and other private sources (including subsidised private payments such as tuition fee loans) ranges from less than 10% in Austria, Finland, Iceland, Luxembourg and Norway (where tuition fees charged by tertiary institutions are low or negligible) to around 70% in Chile, Japan, the United Kingdom and the United States. The share of private funding is related to the level of tuition fees charged by tertiary institutions (Figure C3.2 and Table C3.1, and see Indicator C5). On average across OECD countries, household expenditure accounts for 70% of private expenditure. While household expenditure is the biggest source of private funds in the majority of OECD countries, almost all private funding comes from other private entities (mainly for research and development) in Finland and Sweden, and the share of household expenditure is either zero or very low (Figure C3.2).
Figure C3.2. Distribution of public and private expenditure on educational institutions (2015)
1. Excluding international sources.
2. Primary education includes data from pre-primary and lower secondary education.
3. Year of reference 2016.
Note: International expenditure is aggregated with public expenditure for display purposes.
Countries are ranked in descending order of the proportion of public and international expenditure on educational institutions.
Source: OECD / UIS / Eurostat (2018), Table C3.1. See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Changes in the share of public and private expenditure on educational institutions
Educational institutions from primary to tertiary education are still predominantly publicly funded, although there is a substantial and growing degree of private funding devoted to cover expenses from educational institutions (Table C3.3). Between 2010 and 2015, the share of private spending on primary to tertiary educational institutions increased by 11% on average across OECD countries, while the share of public sources decreased by about 1%. Increases in the share of private funding were observed in 62% of countries, with Estonia (77%) and Spain (56%) showing the largest increases. On the contrary, Chile and Latvia experienced the largest decreases in the share of private spending supported by increases from the public sector.
In many OECD countries, greater student enrolment in non-tertiary education (see Indicator B1) reflects strong individual and social demand. Increases in enrolment have been accompanied by increased investment mainly from private sources and changes in the proportions of public and private expenditure. The increase in the share of funding from private sources between 2010 and 2015 was stronger (30%) than for public sources (5%). These figures, however, are strongly influenced by outliers like Estonia, Israel and Spain, where the share of private funding for non-tertiary education increased by more than 50% between 2010 and 2015. Also large increases were observed during the same period in the share of public funds, notably in Turkey and the United Kingdom (between 25% and 50%).
Although the share of public funding on tertiary institutions increased in some countries, others have fallen behind their 2010 levels. However, these reductions have been compensated by an increase of the private funding. This is the case for example for Australia, Canada and Spain, where the share of public funds decreased by 10 to 20% in 2015 compared to 2010 but the share of private funds increased by 15% to 50% (Table C3.3 and Figure C3.3).
Figure C3.3. Change in relative share of public and private expenditure on tertiary educational institutions (between 2010 and 2015)
1. Primary education includes pre-primary programmes.
2. Private expenditure on government-dependent private institutions is included under public institutions.
Countries are ranked in descending order of the change in the share of private expenditure on tertiary educational institutions between 2010 and 2015.
Source: OECD / UIS / Eurostat (2018), Education at a Glance Database, http://stats.oecd.org/. See Source section for more information and Annex 3 fornotes (http://dx.doi.org/10.1787/eag-2018-36-en).
Public transfers to the private sector
The financial resources devoted to covering expenses from educational institutions combine contributions from governments, international institutions, private institutions and individual students and their families. A large share of government spending goes directly to educational institutions, but governments also transfer funds to educational institutions through various other allocation mechanisms (through tuition subsidies or direct public funding of institutions based on student enrolments or credit hours) or by subsidising students, households and other private entities (through scholarships, grants or loans attributable for tuition fees to educational institutions).
Governments use transfers to provide institutions with incentives to organise their educational programmes and teaching to better meet student requirements, as well as to increase access to education and reduce social inequalities. Channelling funding for institutions through students helps increase competition among institutions and results in greater efficiency in the funding of education. Since aid for student living costs can also serve as a substitute for labour income, public transfers may enhance educational attainment by enabling students to study full time.
Public transfers to the private sector play an important role in the financing of tertiary education (Table C3.2 and Figure C3.1). In countries where tertiary education is expanding, and particularly in those in which students are charged tuition fees, public-to-private transfers of funds are often seen as a means to expand access for lower-income students. However, there is no single allocation model across OECD countries (OECD, 2017[2]). Despite the considerable impact of public transfers on reducing the financial burden of access to tertiary education, government and international support seems to cover only a relatively small share of the private costs of tertiary education in some countries while in other countries private spending is largely covered by public transfers. This creates challenges for access and learning as higher private spending could deter students from participating in tertiary education.
On average across OECD countries, 5% of the total funds are transfers from the public sector to the private sector to cover expenditures on tertiary educational institutions. In 2015, in 3 of the 24 countries with available data, between 20% and 30% of the total funds devoted to tertiary educational institutions were transferred to households or private entities from the government or international sources. Conversely, public transfers were below 1% in countries such as Austria, the Czech Republic, Estonia, Hungary, Iceland and Portugal. Those countries with the highest transfers are also those with the highest tuition fees. However, some countries have high private spending without a large support from the government (OECD, 2017[2]).
Definitions
Initial public, private and international shares of educational expenditure are the percentages of total education spending originating in, or generated by, the public, private and international sectors before the flow of transfers. Initial public spending includes both direct public expenditure for educational institutions and transfers to the private sector and excludes transfers from the international sector. Initial private spending includes tuition fees and other student or household payments to educational institutions, minus the portion of such payments offset by public subsidies. Initial international spending includes both direct international expenditure for educational institutions (for example a research grant from a foreign corporation to a public university) and international transfers to governments.
Final public, private and international shares are the percentages of educational funds expended directly by public, private and international purchasers of educational services after the flow of transfers. Final public spending includes direct public purchases of educational resources and payments to educational institutions. Final private spending includes all direct expenditure on educational institutions (tuition fees and other private payments to educational institutions), whether partially covered by public subsidies or not. Private spending also includes expenditure by private companies on the work-based element of school- and work-based training of apprentices and students. Final international spending includes direct international payments to educational instructions such as research grants or other funds from international sources paid directly to educational institutions.
Households refer to students and their families.
Other private entities include private businesses and non-profit organisations (e.g. religious organisations, charitable organisations, and business and labour associations).
Public subsidies include public and international transfers such as scholarships and other financial aid to students plus certain subsidies to other private entities.
Methodology
Data appearing in earlier editions of this publication may not always be comparable to data shown in the 2018 edition due to changes in definitions and coverage.
All entities that provide funds for education, either initially or as final payers, are classified as either governmental (public) sources, non-governmental (private) sources or international sources such as international agencies and other foreign sources. Figures presented here grouped together public and international expenditures for display purposes. As the share of international expenditures is relatively small compared to other sources, its integration into the public sources does not impact the analysis of the share of public spending.
Not all spending on instructional goods and services occurs within educational institutions. For example, families may purchase commercial textbooks and materials or seek private tutoring for their children outside educational institutions. At the tertiary level, students’ living expenses and foregone earnings can also account for a significant proportion of the costs of education. All expenditure outside educational institutions, even if publicly subsidised, is excluded from this indicator. Public subsidies for educational expenditure outside institutions are discussed in Indicators C4 and C5.
A portion of the budgets of educational institutions is related to ancillary services offered to students, including student welfare services (student meals, housing and transport). Part of the cost of these services is covered by fees collected from students and is included in the indicator.
Expenditure on educational institutions is calculated on a cash-accounting basis and, as such, represents a snapshot of expenditure in the reference year. Many countries operate a loan payment/repayment system at the tertiary level. While public loan payments are taken into account, loan repayments from private individuals are not, and so the private contribution to education costs may be under-represented.
It should be noted that student loans provided by private financial institutions (rather than directly by a government) are counted as private expenditure, although any interest rate subsidies or government payments on account of loan defaults are captured as under public funding.
For more information please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[3]) and Annex 3 for country-specific notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Lithuania was not an OECD member at the time of preparation of this publication. Accordingly, Lithuania does not appear in the list of OECD members and is not included in the zone aggregates.
Source
Data refer to the financial year 2015 (unless otherwise specified) and are based on the UNESCO, OECD and Eurostat (UOE) data collection on education statistics administered by the OECD in 2017 (for details see Annex 3 at http://dx.doi.org/10.1787/eag-2018-36-en). Data from Argentina, China, Colombia, India, Indonesia, Saudi Arabia and South Africa are from the UNESCO Institute of Statistics (UIS).
The data on expenditure for 2005, 2011 to 2015 were updated based on a survey in 2017-18, and expenditures for 2005 to 2014 were adjusted to the methods and definitions used in the current UOE data collection.
Note regarding data from Israel
The statistical data for Israel are supplied by and are under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
References
[1] OECD (2018), Education at a Glance Database, https://stats.oecd.org/ (accessed on 06 July 2018).
[3] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018: Concepts, Standards, Definitions and Classifications, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en.
[2] OECD (2017), “Who really bears the cost of education? : How the burden of education expenditure shifts from the public to the private sector”, Education Indicators in Focus, No. 56, OECD Publishing, Paris, http://dx.doi.org/10.1787/4c4f545b-en.
Indicator C3 Tables
Table C3.1. Relative proportions of disaggregated public, private and international expenditure on educational institutions (2015)
Table C3.2. Distribution of public, private and international sources of funds for educational institutions before and after transfers (2015)
Table C3.3. Trends in the relative proportion of public expenditure on educational institutions and index of change in the relative share of public, private and international expenditure from primary to tertiary levels (2005 to 2015)
Cut-off date for the data: 18 July 2018. Any updates on data can be found on line at http://dx.doi.org/10.1787/eag-data-en. Data can also be found at http://stats.oecd.org/, Education at a Glance Database.
Table C3.1. Relative proportions of disaggregated public, private and international expenditure on educational institutions (2015)
Distribution of public, private and international sources of funds for educational institutions after tranfers from public sources (final source of funds), by level of education
Note: Some levels of education are included with others. Refer to “x” code in Table C1.1 for details. Private expenditure figures include tuition fee loans and scholarships (subsidies attributable to payments to educational institutions received from public sources). Loan repayments from private individuals are not taken into account, and so the private contribution to education costs may be under-represented. Public expenditure figures presented here exclude undistributed programmes. See Definitions and Methodology sections for more information. Data and more breakdowns available at http://stats.oecd.org/, Education at a Glance Database.
1. Excluding international sources.
2. Primary education includes data from pre-primary and lower secondary education.
3. Year of reference 2016.
Source: OECD / UIS / Eurostat (2018). See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Please refer to the Reader’s Guide for information concerning symbols for missing data and abbreviations.
Table C3.2. Distribution of public, private and international sources of funds for educational institutions before and after transfers (2015)
By level of education and source of funding
Note: Some levels of education are included with others. Refer to “x” code in Table C1.1 for details. See Definitions and Methodology sections for more information.
Data and more breakdowns available at http://stats.oecd.org/, Education at a Glance Database.
1. Primary education includes data from pre-primary and lower secondary education.
2. Year of reference 2016.
3. The figures for the United States are for net student loans rather than gross, thereby underestimating public transfers.
Source: OECD / UIS / Eurostat (2018). See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Please refer to the Reader’s Guide for information concerning symbols for missing data and abbreviations.
Table C3.3. Trends in the relative proportion of public expenditure on educational institutions and index of change in relative share of public, private and international expenditure from primary to tertiary levels (2005 to 2015)
Index of change of public, private and international sources of funds for educational institutions (final source of funds), by year
Note: Some levels of education are included with others. Refer to “x” code in Table C1.1 for details. Private expenditure figures include tuition fee loans and scholarships (subsidies attributable to payments to educational institutions received from public sources). Loan repayments from private individuals are not taken into account, and so the private contribution to education costs may be under-represented. Public expenditure figures presented here exclude undistributed programmes. See Definitions and Methodology sections for more information. Data and more breakdowns available at http://stats.oecd.org/, Education at a Glance Database.
1. Primary education includes pre-primary programmes.
2. Private expenditure on government-dependent private institutions is included under public institutions.
Source: OECD / UIS / Eurostat (2018). See Source section for more information and Annex 3 for notes (http://dx.doi.org/10.1787/eag-2018-36-en).
Please refer to the Reader’s Guide for information concerning symbols for missing data and abbreviations.