National Audit Office: outcomes of reform for transition to free higher education are patchy

Priit Simson | 10/23/2019 | 12:00 AM

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TALLINN, 23 October 2019 – The National Audit Office finds that the outcomes of the transition to free higher education and the related rearrangements carried out in 2013 have turned out to be patchy in comparison with the declared goals. Although students graduate faster from institutions of higher education and the dropout rate has decreased, the opportunities of schools for earning extra revenue have become scarce and the higher education funding model has become outdated.

“The reform of 2013 is known as the ‘free higher education reform’ among people, but this name may make it difficult to notice the problems that the reform was supposed to solve,” commented Auditor General Janar Holm. “It may also have been called the reform for guaranteeing underprivileged young people equal access or the reform for improvement of the effectiveness of learning.”

Holm pointed out that according to the audit results, the share of unemployed people and members of households that have received subsistence report who enrol in institutions of higher education has not increased in comparison with the situation before the reform. The higher education reform started at the time when the number of potential students had decreased year after year, which is why the absolute number of people who enrol in institutions of higher education has also decreased from ca 17,000 students to ca 13,000 from 2008 to 2018. 2% of working-age population decided to start acquiring higher education in 2008; 1.81% in 2012 and 1,6% as of 2013.

The share of persons who enrolled in institutions of higher education among people aged 18 to 24 has increased 0.3% in comparison with 2012, the year before the reform. Enrolling in an institution of higher education (again) in the age of 40 and over has become more popular. The National Audit Office advised to develop additional measures for ensuring that need-based special support gets to the target group, because some of the support is not given out at present.

“The picture looks in terms of graduation during the nominal period of studies and the dropout rate has decreased after the reform,” said Auditor General Holm. The dropout rate has decreased from 16.8% before the reform in 2012 to 14% in 2017 at all levels of study. However, the dropout rate is the same as from 2007 to 2009. Students who receive grants and need-based support are less likely to drop out.

Graduation in the nominal period of study has improved at the first and second level of study, but deteriorated in doctoral studies. The main reasons that improved graduation in the nominal period of study were the stricter requirements established with the reform – a part-time student must complete at least half of the annual volume of the curriculum and pay a tuition fee, and passing courses during academic leave was not allowed until now. As of this academic year, it is up to the institutions of higher education to decide whether or not they permit taking courses during academic leave.

Admission of students to specialities where the lack of specialists on the labour market is the biggest has not increased after the reform. Although the state has determined the specialities where the need for new specialists is the greatest, admissions to these 14 curricula groups meet the expectations of the state only in the areas of IT, medicine and healthcare. Admissions to curricula groups where the need for specialists is decreasing has increased to a small extent. Whilst the share of student places subject to tuition fee before the reform was the biggest in social sciences, business and administration, humanities and arts, and service, then the opportunities to study these specialities free of charge also improved after the higher education reform.

“The problem in the case of specialities for which the need is increasing is not ‘bad marketing’ or the unattractiveness or bad quality of the course, but the fact that the wages paid in the speciality are not competitive or there are no actual jobs,” said Holm. “If the demand for labour is acute, but the wages offered are low, then there is nothing that the institutions of higher education or the ministry can do to make it attractive to young people.”

The National Audit Office recommends expanding the payment of speciality-based grants, primarily in the specialities where the need for specialists will increase in the future. The number of students has increased in almost all curricula groups where they are paid speciality-based grants.

The audit revealed that students work as much as they did before the reform. 50% of students worked regularly in 2013 and 53% on average worked from 2016 to 2018. The total share of working students has remained around two-thirds for the last decade. According to the Eurostudent survey, the only country in the EU where the share of working students is bigger than in Estonia is Germany. The dropout rate of working students is higher in groups where salary payouts during the academic year range from two to seven. Working more intensely does not necessarily mean that a student will drop out and the principle ‘if you can take it, you can make it’ seems to apply.

Institutions of higher education have become more international after the reform. Admission of foreign students has tripled from 2012 to 2018. The opening of new curricula in English after the higher education reform has contributed to the increase in the number of foreign students. The majority of students who study in English are from abroad (over 70% in 2017) and their increasing admission has compensated the decrease in the number of Estonian upper secondary school graduates to a certain extent. According to the Ministry of Education and Research, a little over a quarter of the foreign students who graduate from an institution of higher education stay in Estonia and start working here. The share of Estonian students participating in short-term learning mobility has increased from 1.4% in 2015 to 3.4% in 2018, but the target of 10% in 2020 cannot be achieved at the present speed.

The audit also revealed that the higher education funding model is outdated, as it leaves the increase in higher education funding too dependent on the whims of politicians. “In the expectation of offers of ‘free’ things that has taken over Estonia, the is reason to remind everyone that as soon as you plant something, you have to water it,” commented Auditor General Janar Holm. Almost all institutions of higher education stated in their feedback to the National Audit Office that since the amounts allocated from the state budget have not increased much in recent years, the salaries of teachers are not competitive. This may deteriorate the quality of education.

According to Holm, it cannot be said that the state’s support to higher education hasn’t increased – the total amount allocated to institutions of higher education in 2012 was 85.8 million euros. This amount had increased to 143.9 million by 2018. “In the situation where the University of Tartu has initiated a discussion for the establishment of a partial tuition fee, the Ministry of Education and Research should present an analysis of the volume to which unjustified duplication at institutions of higher education has been reduced and where they could reduce it even further,” said the Auditor General.

Holm said that the system of performance-based funding of higher education, which comprises up to 20% of the state’s activity support, doesn’t actually promote high performance. The total amount allocated to institutions of higher education from the state budget doesn’t increase because of someone’s success, but a part of the total funding is internally redistributed, which means that the school only gets more money when another school does badly.

The National Audit Office advises the Minister of Education and Research and the institutions of higher education to develop, within 2020 at the latest, accounting policies and a financial models that would make it possible to assess the financial status of institutions of higher education by way of comparison and the Ministry of Education and Research to clarify on the basis of this whether and on which conditions the funding of institutions of higher education is sustainable. “However, it’s important that the focus stays on the quality of higher education when these choices are made and that access to all capable young people to higher education is guaranteed,” added Holm. “Estonian higher education can certainly not go back to the times before the reform, when it was possible to buy oneself a place in an institution of higher education despite the lack of academic ability.”

The Minister of Education and Research largely agreed with the conclusions of the audit and described how the recommendations made by the National Audit Office will be implemented or which action is already being taken. The Minister emphasised that the implementation of several recommendations, such as expanding the circle of speciality-based grant recipients or the (partial) compensation of the tuition fees of part-time students in specialities where there is a continuing lack of specialists, could be considered if the state increased the funding of institutions of higher education.

The Minister also stated that the needs and trends of the labour market have been given increasingly more attention in the last funding agreements entered into with the institutions of higher education and they will also be taken into account in the future after the relevant analyses and forecasts have been updated and completed.

Speaking about the funding of institutions of higher education, the Minister said that the funding trends of the last 10 years have been analysed and according to them, the general cost of living has increased faster than the funding of institutions of higher education. The competitiveness of the salaries of teachers is under pressure whilst the share of the labour expenses of institutions of higher education has already reached the critical limit. At the same time, the Minister agreed that the institutions of higher education can be requested to analyse sustainable funding and the accounting policies of financing institutions of higher education in cooperation with the ministry, but conceded that this is an enormous task, as the institutions differ from each other in terms of size and profile.

Background: The lack of employees with the necessary knowledge and skills has been one of the biggest obstacles to the development of the state and the economy of Estonia in the last decade. The problem will not disappear by itself, as the working-age population of Estonia is decreasing and ageing, and increasing employment is becoming more and more difficult. Approximately 10,000 more people will leave the labour market in the next 10 years than will enter it; the shortage of people with higher education, especially in areas where the need for labour is higher, is ca 1000 people per year. Therefore, it’s important to support the acquisition of (higher) education by all capable and motivated people, incl. learning the specialities where the demand for graduates is and will be the highest on the labour market and which would help realise the potential of the Estonian economy in the best possible manner. The share of higher education costs of the government sector of the GDP in 2017 was ca 1%, i.e. almost 239 million euros.

* Already in 2007, the Organisation for Economic Co-operation and Development (OECD) expressed doubts in its analysis whether the organisation of higher education in Estonia at the time is capable of producing university graduates for economic sectors that suffer from shortage of labour and have great development potential. The reason being that the institutions of higher education could not educate enough specialists in the specialities important to the state. For example, the number of graduates in the specialities of natural and exact sciences that are a priority to the state was up to two times smaller than expected. This led to the start of discussions, which led to fundamental changes in the higher education system, i.e. the higher education reform.


Priit Simson
Communication Manager of the National Audit Office
+372 640 0777
+372 5615 0280
[email protected]
[email protected]

  • Posted: 10/23/2019 12:00 AM
  • Last Update: 10/22/2019 3:07 PM
  • Last Review: 10/22/2019 3:07 PM

Main Building of the University of Tartu.

Kristjan Teedema / Tartu Postimees / Scanpix Baltics

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