On funding of higher education in Estonia

Posted: June 6th, 2010 | Author: | Filed under: education, Estonia, university | No Comments »

One of the reasons for the structural weakness of the Estonian Higher Education system is the way it is financed. There are a number of state-funded places at universities, which are given according to a service contract to be agreed every year based on what the state determines is necessary. This is based purely on the lobby work universities are able to do at the Ministry of Education and Research and on how well they have implemented the directives coming from the Ministry. In that sense the system of higher education in Estonia is based on a model of state planning (just like it was in the Estonian Soviet Socialist Republic).

Recently the system was modified so that now the state “orders” for example an x number of social sciences (business, law, etc) students from one university and y number of social sciences students from another. Again, these numbers are based purely on favours, ministerial whims and how a given university stands in the eyes of the Ministry officials. Therefore, when before it was purely up to the state to decide how many lawyers it orders, then now it also depends on the position of the law department within the university (if it is powerful it gets more places, if not then not).

There is fierce competition to certain state-funded places (business, law, IT), whereas certain curricula remain unfulfilled (mostly “hard” sciences). All other students pay themselves fully for their studies and there is a lot of them.

Now, these are the consequences of this system:

  1. The students are completely left out of the decision-making on where state funding goes. The students vote with their feet and choose areas of study they think are more benefitial for them in the future. The state funding completely ignores this will of the students and keeps funding areas where no-one wants to study, forcing students to study things they do not want, provided that they cannot afford to pay for the studies themselves.
  2. The universities suffer as poor quality and unnecessary departments and faculties are kept afloat by state financing. There is no incentive for improvement, which results in poor quality graduates.
  3. In departments/faculties where there is interest by the students, but no or little state financing this means also loss of quality as the departments must relay to a large extent on self-financing students, who work at the same time or who have been unable to get to the few state-funded places.

The OECD has recommended already in 2007 in their review of the Tertiary Education in Estonia that student enrollment should be the basis of higher education strategy:

The Review Team is of the view that Estonia should ensure that any new financing arrangements continue to allow student demand to have a significant influence both on the overall size and shape of the higher education system in Estonia and provision at the institution level. This would entail the state financing institutions on the basis of actual enrolments or graduations rather than purchasing, in advance, places in particular fields and levels of study. Following this line of thinking, we believe that the Estonian government should reflect on extending public subsidies to all students in properly accredited courses at private institutions (once the quality assurance arrangements planned by the 2006-2015 Higher Education Strategy are fully operational) as well as allowing the total number of students receiving public support to be driven by demand rather than rationed.


Moving to a system in which student demand is the main driver behind the distribution of students between and within institutions would also necessitate the reconceptualisation of the contract between the government and institutions. In a sense the state would move from being a purchaser of a defined set of services to that of a funding partner with students. The Review Team believes that this role remains compatible with a broadly contractual relationship with institutions in which institutions are expected to meet certain requirements particularly regarding quality and orientation to the labour market. In this context, the focus of the contract should move from the specifics of the places purchased to the broad objectives which the government would like institutions to achieve. The negotiation of the contract could become a process whereby the government as a funding partner engages in a strategic discussion with institutions of higher education about directions and means.

The current system of financing simply reinforces the existing structural faults and keeps the higher education system severly handicapped. The universities remain state-oriented, not student-oriented.

Those students who can afford to do so do not go to study what the state wants them to study in order to sustain certain areas of teaching (certain professors), they will pay themselves or go abroad.

Without excellent and motivated students there is no room for competitive research either, and the more bright people move away and contribute to the research of some other country, the poorer Estonia will remain, both academically and economically.

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