Tuition fees and equal access to higher education in Germany and the EU: An analysis from a law and economics perspective

Abstract

The design of both tuition fees and their accompanying loan systems determines their effect on the goals of investment in higher education, equal access to higher education, free choice between universities as well as cost-effective provision of the loans. Under a law-and-economics approach, this dissertation analyses the attainment of these goals by the current German tuition fee and loan systems and by a system of differentiated tuition fees for higher education in a federalist constitutional setting, in particular the Federal Republic of Germany and the European Union. In the first part, the recently introduced German tuition fee and loan systems are found not to infringe the constitutionally protected right to equal access to higher education. However, it is argued that the publicly provided income-contingent loan system is not designed cost-effectively and therefore infringes the German constitution. Secondly, it is discussed whether it would be socially desirable to introduce the US system of differentiating tuition fees according to state of long term residence within Germany and within the EU. In both systems, decentralised State governments decide about public investment in higher education. Even with tuition fees they subsidise every place at a university. If mobile students have a right to equal treatment and pay the same amount of tuition fees than domestic students, which is currently the case in Germany and in the EU, State governments have an incentive to reduce their investment in higher education. In this case, the number of students studying in another State in order to receive a better education increases, which saves the home State the cost of higher education, but students return with a high probability to their home State afterwards. Allowing States to differentiate tuition fees according to state of long-term residence would remove this free-riding incentive and would increase their higher education investment incentives. Analysing a hypothetical case of charging migrant students full-cost tuition fees, this positive effect is weighed against the negative effects on the goals of non-discrimination and free choice of university. In Germany, it is argued that the negative effects would be stronger than the positive effect and therefore differentiating tuition fees according to State of long-term would not be socially desirable. In the EU, the positive effect would outweigh the negative effect and therefore the European Court of Justice should reconsider its judgements banning differentiated tuition fee between EU Member States. The best solution to the free-riding problem with regard to higher education investment, however, would be to create a system of transfer payments between the States in which the home State compensates the host State for educating migrant students.