There’s No Such Thing As A Free College Education

In 2006, Germany opted to lift a universal ban on college tuition and fees, which lead to the charging of tuition in seven states. However, this ban was short lived and was recently repealed in Lower Saxony, Germany, reverting back to the pre-2006 tuition and fee free university model. German political figures in support of the tuition free system referred to charging tuition as “socially unjust.”

But what does this really mean for college students? Is there really such thing as a free college education? According to economists, the free college education system now in place in Germany will actually cost college students, and German citizens for that matter, more in the long run.

It comes as no surprise that even though German colleges are tuition free there is still a significant cost in keeping their doors open to students. So how does the tuition free system make up for the lost revenue? Like many colleges and universities around the world, German universities rely heavily on government subsides to make up for the revenue. However, with the newly revived tuition free system, German universities will be entirely dependent on government funding. This increased governmental expenditure will inevitably lead to higher income tax rates. According to the Organization of Economic Co-operation and Development (OECD) Germany already imposes the second highest income tax burden of the 34 OECD countries. In 2012 the tax burden placed on German citizens was a staggering 49.8 percent, which is sure to increase.

Not only will German citizens feel the increased weight of funding the universities through their taxes, but what economists are calling a “Moral Hazard” will likely also increase the average cost per students to obtain a degree. This “Moral Hazard” arises when students are relieved of the financial burden and realities realized through paying for one’s tuition. By absorbing the financial burden traditionally imposed on students, the tuition free system is also removing the incentive students had to graduate on time and making them less cost sensitive. Due to such, it is likely that Germany will see an increase to the average time students spend obtaining their college degrees.  

In addition to the increased cost in obtaining a degree, the loss of cost sensitivity may also lead to decreased accountability for the quality of education provided by the German universities. Like in many situations, people, or students in this case, are less like to hold another party accountable for the product or service they receive when they are not financially burdened. Take for example the K-12 education system in the US: the public K-12 system has long been criticized for it’s ineffectiveness and declining standards while the private K-12 system seems to be flourishing.  

Finally, economists point out that, all things being equal, students who receive the same college degree will pay vastly different amounts for their “free college education” after graduation depending on what career path they choose. Take for example two students who take the exact same classes and obtain the same degree: if one student goes to work for the government after graduation and the other for a private company (doing the same work as the other student), it is likely that because of higher wages the student working for the private company will pay substantially more in taxes for his education. Granted, similar situations play out in any country that subsidizes colleges and universities, however, it will be substantially more prominent in Germany due to the increased taxes that will be needed to fund the tuition free universities.
Even with all the aforementioned hidden realities of the German tuition free system there is one undeniable benefit: increased access to higher education. Though the system disguises its true costs, it does so in an effort to make college education more accessible to everyone.
Best regards
und viele Grüße aus Charlotte
Reinhard von Hennigs