Education at a Glance 2024

Chapter C3. How much public and private investment in educational institutions is there?

Highlights

• On average, across OECD countries, the government is the primary source of funding for both public and private primary schools. For public institutions, the government covers nearly all expenditure, amounting to about USD 11 900 per student, while it accounts for less than 60% of the costs for private ones, roughly USD 7 900 per student. Ultimately, how much is spent per student on public and private institutions varies considerably across countries.

• In several OECD countries, such as Finland, Norway, and Sweden, government funding covers nearly all the costs of private primary education. In contrast, private schools in Bulgaria, Ireland, and Mexico do not receive government funding and households bear the entire cost.

• As students advance through the education system, the reliance on private expenditure grows. On average across OECD countries, household contributions to educational expenses rise from 5% at primary level to 7% at secondary level and 19% at tertiary level. This underscores the importance of financial support at tertiary level to guarantee equitable access for all students.

Context

Ensuring individuals have access to high-quality learning opportunities, regardless of their background, is the backbone of an equitable education system. Analysing the funding mechanisms of different types of institutions allows for a deeper exploration of equity issues. Public education, funded and operated by government entities, is designed to be accessible to all students. In contrast, private institutions often charge tuition fees for programmes that are free in public institutions, creating financial barriers to access.

The relationship between private education and equity is complex. First, private institutions in some systems may be almost entirely government-funded, removing potential sources of inequity that would result from financial barriers, but others may rely exclusively on private tuition fees. Second, some drivers of inequity may exist no matter how private schools (and indeed public ones) are funded. For example, academic selection into certain schools is likely to lead to a more socio-economically homogeneous student body.

This chapter sheds light on these aspects by first looking at how much is spent per student in different types of institutions at primary level. It then analyses the proportion of government and private funding allocated to educational institutions at various education levels, and the relative importance of government transfers to households in subsidising education. Finally, it examines recent trends in the sources of expenditure at tertiary education level.

Other findings

• In OECD member and partner countries where private schools do not receive government funding, the sector tends to remain small in terms of the share of enrolment (e.g. Bulgaria, Ireland and Mexico).

• Household spending on education across OECD countries follows a U-shaped pattern, with larger shares of expenditure coming from private sources at pre-primary and tertiary levels, where education is mostly not compulsory. In contrast, compulsory primary and secondary education receives significant public investment, lowering the share of household contributions.

• In Japan, around half of tertiary education funding comes from households. Despite this, Japan has one of the highest proportions of 25-34 year-olds with tertiary degrees among OECD countries.

• Households in Romania have to contribute very little to tertiary education, with the share of expenditure remaining below 5% between 2015 and 2021. However, only 22% of 25-34 year-olds in Romania have completed a tertiary degree, suggesting that participation in education is influenced by factors beyond its immediate cost to families, such as cultural norms.

Analysis

Government and private sources of expenditure on primary educational institutions

Expenditure per student in private versus public institutions

The way resources are allocated to public and private institutions varies widely across countries, although both types of institutions have similar average levels of expenditure per student at primary level (Figure C3.1.). On average across OECD countries, expenditure per student on primary institutions amounts to about USD 12 200 in public institutions, and to about USD 12 300 in private institutions. The government is the largest contributor in both cases, although it covers almost all expenditure in public institutions (about USD 11 900 per student) but less than 60% in private institutions (about USD 7 900 per student). The lower government expenditure on private institutions is compensated by money from private sources, mostly households. About USD 4 200 per student comes from household sources in private primary institutions, much higher than the USD 210 per student in public primary institutions (Table C3.1).

There is wide variation across countries in household spending on private primary institutions. In Poland, 7% of primary students are enrolled in private institutions with households spending more than USD 16 000 per student, while the government contributes over USD 10 000 per student, resulting in the largest amount spent on private primary institutions per student across OECD countries (about USD 26 600). This is more than double the amount spent per student in public institutions in Poland (about USD 11 600). Norway has the second highest expenditure on private primary institution per student across OECD countries (about USD 25 000) and, exceptionally, 100% of this expenditure comes from the government. This means the Norwegian government spends more per student on private primary institutions than on public ones (about USD 17 800). This is also the case in Finland, Germany, Hungary and Romania (Figure C3.1.).

Funding arrangements and size of the private sector

One question for policy makers is whether the private education sector is a source of inequity. The data show that how private schools are funded can vary significantly across countries. In some systems, private schools are funded in the same way as public schools and may enrol a large share of students. In other countries, private schools require students’ families to fully fund their education and enrol only a small share of children. The equity implications of these different funding models are obviously very different. In addition, barriers to access may be non-financial – for example, selection mechanisms into private schools, such as entry exams, may also act as a vehicle for social segregation.

In countries where the private sector is relatively large, with an above-average share of students enrolled in private institutions, the share of expenditure coming from the government is also relatively high. For example, in the Netherlands, nearly all primary students are enrolled in government-dependent private institutions, which are 99% funded by the government. In Belgium, over half of primary students are enrolled in government-dependent private institutions and the government supports 95% of the expenditure in such institutions. Access to both public and government-dependent private institutions is tuition-free. In eight countries, private primary institutions are predominantly government funded (at least 95% of expenditure is provided by the government) (Figure C3.2). In these countries, students from lower socio-economic backgrounds are less likely to face financial barriers to private education. However, other factors, such as selection mechanisms for entry into private institutions, also affect the degree of socio-economic diversity within schools. Inclusive admissions policies can prevent students from privileged socio-economic groups being concentrated in private schools and foster a more diverse learning environment.

The funding mechanism for private schools is very different in Bulgaria, Ireland and Mexico, where households cover 100% of the expenditure on private primary institutions. In these countries enrolment in private institutions is much lower, ranging from 1% in Ireland, to 2% in Bulgaria and 9% in Mexico (Figure C3.2). More broadly, in countries where private schools receive limited government funding and most expenditure is covered by private sources, private schools tend to have a small share of enrolment. This suggests that the requirement for families to fully or largely fund the education of their children creates a substantial barrier to participation. As financial barriers are most likely to affect lower-income households, reliance on private sources is likely to increase the concentration of students from privileged backgrounds in private schools.

The balance of government and private sources across levels of education

In most OECD countries, the share of private expenditure is highest in pre-primary education and in tertiary education. The share of private expenditure and enrolment in private institutions also tends to increase from primary to secondary and tertiary education. On average across OECD countries, 5% of expenditure on educational institutions at the primary level comes from households, rising to 7% at secondary level and 19% at tertiary level (Figure C3.3). This is in line with the share of students enrolled in private institutions which also increases with the level of education: 15% at primary, 21% at secondary and 32% at tertiary level (see Data Explorer).

Tertiary education, unlike primary and secondary education, is not compulsory, and students pursue it with the expectation of gaining personal and professional benefits (see Chapter A4 on the earnings benefits associated with tertiary qualifications). Given that these benefits will accrue to the students, many countries require them to bear some of the costs of their education (see Chapter C5). How the costs of tertiary education are shared varies across countries – in Chile, Japan and the United Kingdom, over half is covered by households, while in Denmark, Finland, Luxembourg, Romania and Sweden, households cover 1% or less of the costs (Figure C3.3).

In many OECD countries, pre-primary education is also not compulsory (see Chapter B1) and households bear a significant portion of the costs. The associated equity challenge is that the significant financial burden on households can limit access to pre-primary education, in particular for children from lower-income families, and can create educational inequalities from an early age. The share of household contributions is higher at this level than any other level of education in some countries. For example, in Denmark, households cover 23% of pre-primary expenditure, whereas tertiary education costs are funded by the government (84%), other private entities (12%) and international sources (5%). Similarly, in Portugal, even though pre-primary education is free (see Chapter B1), households still contribute 33% of expenditure at that level, the highest among OECD countries, and more than their contribution to tertiary education (27%). In 13 OECD and partner countries, households bear a larger portion of the costs for pre-primary educational institutions than they do for tertiary ones (Figure C3.3).

The share of household expenditure on educational institutions therefore forms a U-shaped pattern on average across OECD countries, reflecting the non-compulsory nature of pre-primary and tertiary education and the higher enrolment in private institutions at these levels, resulting in greater shares of private spending. In contrast, compulsory primary and secondary education benefits from substantial public investment, reducing household contributions (Figure C3.3).

Government transfers to households

Figure C3.3. provides data on expenditure based on the final sources of funds, i.e. after transfers from government to households in the form of student loans, scholarships and other grants. As a result, the share of household expenditure can appear high in many countries. Although these subsidies represent a small share at primary level, their relative importance increases with the level of education (Table C3.4., available on line).

By tertiary level, in some countries, government subsidies may exceed reported household expenditure on educational institutions. This is the case in Austria, Belgium, Ireland, Luxembourg, the Netherlands, Norway, Romania and Sweden, driven by different factors (Table C3.4., available on line). For instance, in Austria, estimates of household expenditure might not fully cover their actual spending. In the French Community of Belgium, receiving a scholarship exempts students from paying tuition fees. In Luxembourg, tuition fees are low and the government provides subsidies to students even if they live with their parents and pay no rent. Finally, in Sweden, grants and loans for students cover living costs, which are not categorised as household expenditure on education. In all these cases, reported household expenditure will be lower than the government subsidies received.

Trends in sources of expenditure in tertiary education

Trends in the distribution of expenditure on education illustrate changes in the financial burden borne by households during access to tertiary education. Figure C3.4 complements the analysis in Chapter C5, which focuses on tuition fees and public support for students. It illustrates the changes in the share of household expenditure on tertiary education between 2015 and 2021.

On average across OECD countries, household expenditure on tertiary education fell slightly, from 21% to 20% during this period and in the majority of OECD and partner countries, the share of expenditure coming from households remained stable or experienced little change. In 12 countries, the share changed by 1 percentage point or less between 2015 and 2021, showing that the share of the financial burden has not increased for families in most cases. Chile and the United Kingdom both have high reliance on private funding and saw an increase in the portion of tertiary education expenditure borne by households over this period (Figure C3.4). In the United Kingdom, the increase occurred in the context of various changes in the funding of tertiary education, including major increases in tuition fees in England (United Kingdom) since 2012 (Hubble and Bolton, 2018[1]) (see also Chapter C5 on tuition fees and financial support).

Meanwhile, some countries have seen significant decreases in the share of expenditure on tertiary institutions coming from households. The share in Bulgaria dropped from 50% to 35% between 2015 and 2021, suggesting enhanced public funding or subsidies aimed at reducing the financial burden on households. Similarly, in Korea, Latvia, New Zealand and the United States, households’ share of expenditure fell by more than 5 percentage points over this period. For New Zealand the lower share in 2021 is largely due to the introduction in 2018 of zero fees for first-year domestic tertiary students, as well as fewer higher-fee paying international students in 2021 compared to 2015 (Figure C3.4).

In Japan, about half of the funding for tertiary education is provided by households, a share that has fallen only slightly, from 52% to 51%, between 2015 and 2021. Despite this significant household contribution, Japan remains one of the OECD countries with the highest proportion of 25-34 year-olds who hold a tertiary qualification (see Chapter A1). In contrast, in several countries the share of household contributions to tertiary education has remained well below the OECD average. In Austria, Finland, Norway, Luxembourg, Romania and Sweden, household expenditure remained below 5% of total contributions over this period. Yet in Romania, only 22% of 25-34 year-olds have completed a tertiary degree. This shows that participation in tertiary education is influenced by several factors beyond financial investment. These include cultural norms, social expectations, government policies and individual motivations.

Definitions

Initial government (public), private and international (non-domestic) shares of educational expenditure are the percentages of total education spending originating in, or generated by, the government, private and non-domestic sectors before transfers have been taken into account. Initial government funding includes both direct public expenditure on educational institutions and transfers to the private sector, and excludes transfers from the non-domestic sector. Initial private funding includes tuition fees and other student or household payments to educational institutions, minus the portion of such payments offset by government subsidies. Initial non-domestic funding includes both direct expenditure for educational institutions from non-domestic sources (for example, a research grant from a foreign corporation to a public university) and transfers to governments from non-domestic sources.

Final government (public), private and (non-domestic) international shares are the percentages of educational funds expended directly by government, private and non-domestic purchasers of educational services after the flow of transfers. Final government funding includes direct purchases of educational resources and payments to educational institutions by the government. Final private funding includes all direct expenditure on educational institutions (tuition fees and other private payments to educational institutions), whether partially covered by government subsidies or not. Private funding also includes expenditure by private companies on the work-based element of school- and work-based training of apprentices and students. Final non-domestic funding includes direct international payments to educational institutions such as research grants or other funds from non-domestic 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, business and labour associations, and other non-profit organisations).

Government subsidies include government and non-domestic transfers such as scholarships and other financial aid to students plus certain subsidies to other private entities.

Methodology

All entities that provide funds for education, either initially or as final payers, are classified as either government (public) sources, non-government (private) sources, or international sources such as international agencies and other foreign sources. The figures presented here group together public and international expenditures for display purposes. As the share of international expenditure is relatively small compared to other sources, its integration into public sources does not affect 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, are excluded from this chapter. Government subsidies for educational expenditure outside institutions are discussed in Chapter C4.

A portion of educational institutions’ budgets 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 here.

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 government 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.

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 government funding.

For more information, please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[2]) and Education at a Glance 2024 Sources, Methodologies and Technical Notes for country-specific notes (https://doi.org/10.1787/e7d20315-en).

Source

Data refer to the financial year 2021 (unless otherwise specified) and are based on the UNESCO, OECD and Eurostat (UOE) data collection on education statistics administered by the OECD in 2023 (for details see Education at a Glance 2024 Sources, Methodologies and Technical Notes at https://doi.org/10.1787/e7d20315-en). Data from Argentina, China, India, Indonesia, Saudi Arabia and South Africa are from the UNESCO Institute of Statistics (UIS).

The data on expenditure for 2015 to 2021 were updated based on the UOE data collection in 2023 and adjusted to the methods and definitions used in the current UOE data collection.

Data from Table X2.2. are used to compute expenditure in constant 2015 prices and in equivalent USD converted using PPPs.

References

[1] Hubble, S. and P. Bolton (2018), “Higher education tuition fees in England”, Briefing Paper, No. 8151, House of Commons Library, https://dera.ioe.ac.uk/id/eprint/31330/1/CBP-8151%20_Redacted.pdf.

[2] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en.

Chapter C3 Tables

Tables Chapter C3. How much public and private investment in educational institutions is there?

Table C3.1.	Expenditure on educational institutions per full-time equivalent student, by type of institution and source of expenditure (2021)
Table C3.2.	Distribution of expenditure on educational institutions, by type of institution and source of expenditure (2021)
Table C3.3.	Trends in the share of government, private and non-domestic expenditure on educational institutions (2015 and 2021)
WEB Table C3.4.	Government contributions to household expenditure on education (2021)

Statlink

Cut-off date for the data: 14 June 2024. Any updates on data and more breakdowns can be found on the OECD Data Explorer (http://data-explorer.oecd.org/s/4s).

Table C3.1. Expenditure on educational institutions per full-time equivalent student, by type of institution and source of expenditure (2021)

In equivalent USD converted using PPPs for GDP, direct expenditure within educational institutions (final source of funds), by level of education

Note: See under Chapter C3 Tables section for StatLink and Box C3.. for the notes related to this Table.

 

Note: See under Chapter C3 Tables section for StatLink and Box C3.1 for the notes related to this Table.

Table C3.2. Distribution of expenditure on educational institutions, by type of institution and source of expenditure (2021)

Direct expenditure within educational institutions (final source of funds), by level of education, in per cent

Note: See under Chapter C3 Tables section for StatLink and Box C3.1 for the notes related to this Table.

 

Note: See under Chapter C3 Tables section for StatLink and Box C3.1. for the notes related to this Table.

Table C3.3. Trends in the share of government, private and non-domestic expenditure on educational institutions (2015 and 2021)

Private and public institutions combined, direct expenditure within educational institutions (final source of funds), by level of education, in per cent

Note: See under Chapter C3 Tables section for StatLink and Box C3.1 for the notes related to this Table.

Box C3.1. Notes for Chapter C3 Tables

Table C3.1. Expenditure on educational institutions per full-time equivalent student, by type of institution and source of expenditure (2021)

Note: Data on R&D are included in tertiary education, unless otherwise specified.

1. Primary education includes pre-primary and lower secondary programmes.

2. Household expenditure includes expenditure outside educational institutions.

3. At primary level, expenditure from the central government on government-dependent private institutions is included in expenditure on public institutions.

4. Figures are for net student loans rather than gross, thereby underestimating public transfers.

5. Primary includes lower secondary education.

Table C3.2. Distribution of expenditure on educational institutions, by type of institution and source of expenditure (2021)

Note: Data on R&D are included in tertiary education, unless otherwise specified.

1. Primary education includes pre-primary and lower secondary programmes.

2. Household expenditure includes expenditure outside educational institutions.

3. At primary level, expenditure from the central government on government-dependent private institutions is included in expenditure on public institutions.

4. Figures are for net student loans rather than gross, thereby underestimating public transfers.

5. Primary includes lower secondary education.

Table C3.3. Trends in the share of government, private and non-domestic expenditure on educational institutions (2015 and 2021)

Note: Data on R&D are included in tertiary education, unless otherwise specified. The share of expenditure from other private entities and from non-domestic sources is available for consultation on Data Explorer.

1. Primary education includes pre-primary and lower secondary programmes.

2. Household expenditure includes expenditure outside educational institutions.

3. Figures are for net student loans rather than gross, thereby underestimating public transfers.

4. Primary includes lower secondary education.

See Definitions and Methodology sections and Education at a Glance 2024 Sources Methodologies and Technical Notes (https://doi.org/10.1787/e7d20315-en) for more information.

Data and more breakdowns are available on the OECD Data Explorer (http://data-explorer.oecd.org/s/4s).

Please refer to the Reader's Guide for information concerning symbols for missing data and abbreviations.