Universities at Risk of Collapse... Investing Grants Directly into Universities (Comprehensive)

Ministry of Education and Ministry of Strategy and Finance Announce Establishment of 11.2 Trillion KRW Higher Education Special Account
Declining School-Age Population and Tuition Freeze Predict Admission Resource Cliff in 10 Years
Grant Funding to Increase by 12 Trillion KRW Next Year… Ministry of Education Says "No Issues with Facility Investment"
Ministry of Strategy and Finance Draws Line on Tuition Hikes, States "Social Consensus Needed"
Announcement Premised on National Assembly Approval, No Alternatives to Persuade Primary and Secondary Education Sectors

[Asia Economy Reporter Han Jinju] The government plans to invest a portion of the Local Education Finance Grants, previously used for elementary, middle, and high school education, into higher education. The budget for the general financial support project for universities will be nearly doubled, and a separate budget will be established to support regional universities. Although the government aims to eliminate the 'financial partition' in education and provide balanced support to the relatively underfunded higher education sector, implementation is only possible after the bill passes in the National Assembly.

On the 15th, the Ministry of Education and the Ministry of Economy and Finance held a joint briefing at the Government Seoul Office, announcing the establishment of a 'Higher and Lifelong Education Support Special Account' worth 11.2 trillion won. This involves converting 8 trillion won from the Ministry of Education's existing university support project budget and the Ministry of Employment's support projects for Polytechnics and Korea University of Technology and Education, 3 trillion won from a portion of the education tax within the Local Education Finance Grants, and 200 billion won from the general account transfer into the special account.

The general financial support needed by universities will be expanded from 1 trillion won to 1.9 trillion won, and a separate additional support track for specialized fields of regional universities will be newly established with a scale of 2.5 trillion won over five years. The government also plans to provide about 900 billion won to replace and expand aging educational and research facilities and equipment at national universities.

Government Rolls Up Sleeves for University Financial Crisis... Cautious Approach on Tuition Fee Increase

Universities are facing difficulties due to a decline in student enrollment rates caused by a decreasing school-age population, a freeze on tuition fees for 14 years, and concurrent university restructuring. Tuition fees account for 56.7% of private universities' educational accounting income, accelerating financial instability in private universities. The government's budget related to higher education accounts for only about 15% of the total grants, amounting to 11.9 trillion won.

Moreover, with projections that university admission quotas will sharply decline from 475,000 this year to about 310,000 by 2033, there is a consensus on the need for support to ensure the survival and capacity enhancement of universities.

According to the University Education Council, OECD member countries invest more in public education per student in higher education (10,559 USD) than in elementary and secondary education (10,662 USD). France invests 1.6 times more in higher education than in elementary and secondary education, while the US and the UK invest 2.4 times more. The OECD average public education expenditure per student in higher education is 10,559 USD, but South Korea (11,287 USD) falls significantly short of this.

However, the Ministry of Economy and Finance has drawn a line on the 'tuition fee increase' plan to resolve university financial difficulties. Choi Sang-dae, the second vice minister of the Ministry of Economy and Finance, explained, "While it is an issue to be discussed in the future from the perspective of deregulating universities, there are various factors to consider. We need to comprehensively consider the thoughts of parents and students on tuition levels, especially after experiencing COVID-19. It is a matter that requires sufficient discussion with stakeholders while forming social consensus rather than rushing into discussions."

Splitting Grants, What Are the Persuasive Alternatives?

On the 15th, at the Government Seoul Office, Jang Sang-yoon, Vice Minister of Education, delivered a greeting during a joint briefing by the Ministry of Education and the Ministry of Economy and Finance regarding the establishment of the 'Special Account for Support of Higher and Lifelong Education.'

The Local Education Finance Grants are used for budgets in kindergarten, elementary, and secondary education and consist of 20.79% of domestic taxes and a portion of the education tax. The grant size has steadily increased over the past five years, and it is expected to reach 65 trillion won in this year's main budget and 77 trillion won in next year's budget proposal. The amount estimated to be accumulated by city and provincial education offices by the end of this year is 19.4 trillion won. The government is pushing for related legal amendments to allocate a portion of the education tax within the grants to the Higher and Lifelong Education Support Special Account for use as higher education finances.

While announcing the establishment of a special account funded by a portion of the grants, the government has not presented alternatives to persuade the kindergarten, elementary, and secondary education sectors. Although the grants have increased significantly this year, if the grants decrease in the future due to economic downturns, schools will have to reduce operating expenses instead of personnel expenses. This is because 60% of education finances are spent on personnel costs such as teachers, and personnel expenses do not decrease even if the number of students declines.

Professor Song Ki-chang of Sookmyung Women's University said, "If the grants do not increase in line with personnel cost increases, supplementary measures to compensate for this must be prepared. In the past, local governments issued bonds when grants decreased, but now there is a need to prepare safeguards for when grants decline. Although there is currently a domestic tax grant rate adjustment clause, it only applies to personnel costs for compulsory education teachers, and it has never been utilized."

The National Assembly's Education Committee plans to submit the amendment to the Grants Act and the Special Account Act at the plenary session on the 18th. City and provincial superintendents of education, teacher and parent organizations are opposing the move, arguing that "money is being taken from elementary and secondary education and moved to universities," and the opposition party also opposes it, making the bill's passage in the National Assembly uncertain.

Deputy Minister Jang Sang-yoon of the Ministry of Education said, "We will present the special account bill in early September and are preparing for discussions in the Education Committee. We have been persuading the National Assembly about the content and purpose with the determination that it must pass within the regular session. Since there is no way to create other enforcement ordinances or subordinate regulations on the premise of establishing a special account, we will focus on passing the law first."

The government believes that with the grant increasing by more than 10 trillion won by next year, there will be no problems in investing in elementary and secondary education facilities. Deputy Minister Jang explained, "The fact that a large amount of reserves is accumulated indicates inefficiency in investment. While there are concerns about teacher shortages and facility investments, it is not impossible to proceed by deducting 3 trillion won. Investment should be prioritized, and the current reserves are sufficient for funding." Park Geum-cheol, the social budget review officer at the Ministry of Economy and Finance, explained, "Unless there is a negative growth rate or tax revenue decline like during the IMF foreign exchange crisis, the portion linked to domestic taxes is growing steadily."

Establishment of Special Account, Where Will the Investment Go?

The Ministry of Education plans to completely overhaul the current Basic Competency Diagnosis Evaluation from 2025 and double the budget for the University Innovation Support Project from 5 billion won to 10 billion won per school. General financial support for the University Innovation Project will be increased from 1 trillion won to 1.9 trillion won, and some restrictions on the use of personnel and operating expenses will be lifted. The evaluation method will shift to a system of prior financial support followed by university self-assessment and government post-performance review.

Since the Basic Competency Diagnosis Evaluation has been criticized for 'ranking' universities, it is expected that quantitative indicators such as education cost per student, educational facilities, and teacher securing rates will be used for evaluation, followed by self-performance evaluation. Comprehensive general financial support will be increased from the current 1 trillion won to 1.9 trillion won, and the use of personnel and operating expenses will be allowed to expand autonomy. A Ministry of Education official said, "The number of supported universities remains the same, but the evaluation system and support scale will change, and new evaluation criteria will be prepared by the end of the year."

Through the special account, all aging educational and research facilities at national universities will be replaced over five years, a 500 billion won support track for regional university specialization will be newly established, and regional universities will be supported to freely design their specialized fields. The government will support strengthening the regional education and research roles of national universities and select additional regional research-focused universities (Glocal BK).

National universities' aging educational and research facilities will be fully replaced over five years, and budgets will be concentrated to encourage research by master's and doctoral talents. For private universities, financial diagnosis and management consulting for structural reform will be promoted. Although specific support items are designated for national and regional universities, there are criticisms that support measures for private universities are relatively insufficient. Additionally, considering that 85% of universities are private, there are concerns about this plan involving public funds.

The Ministry of Education plans to support private universities that require investment but open exit routes for failing universities through laws such as the 'Private University Structural Improvement Act.' Deputy Minister Jang said, "Through financial diagnosis of private universities, universities that are pushed to the limit or can no longer improve quality will be given options such as consolidation, conversion to public interest corporations, or rehabilitation. If legislation proceeds in parallel, the structural improvement budget support will help distinguish the wheat from the chaff."

This content was produced with the assistance of AI translation services.