Funding

discussed later in this chapter, ultimately it is the regulator’s duty to ensure that the options available are good and that students have the financial means to choose among them.

These caveats notwithstanding, program-level information is still necessary. As stressed at the beginning of this chapter, it will not solve all problems—but will solve several of them, particularly when combined with others such as regulation and funding. Collecting the relevant data is the first step. The policy makers’ own need for program-level information might spearhead data collection efforts, as it is impossible to monitor individual programs without knowing their outcomes. More generally, the goal is to create an information-based higher education culture in which information is provided and used to make consequential decisions, and providers, knowing they are being monitored by students and policy makers, strive to offer a good product.

Funding

Policy makers around the world subsidize higher education for efficiency and equity reasons. Since higher education benefits society as a whole, they subsidize it to induce individuals to pursue it in order to build the economy’s optimal level of human capital. They also subsidize it because many students, left to their own resources, cannot afford higher education. To subsidize higher education, they can make transfers to HEIs and students, or can intervene in the student loan market by providing, guaranteeing, or subsidizing student loans. In LAC, policy makers’ subsidize public HEIs, provide little or no subsidies to private HEIs or their students, and sometimes intervene in the student loan market—which is very small, at least in the WBSCPS countries.8

At the moment, the higher education funding in LAC is not equitable and is often regressive. It is not equitable at public HEIs, where the annual per-student subsidy for SCPs is lower, on average, than for bachelor’s programs (chapter 1). The subsidy gap becomes even larger when the total subsidy is considered—over the whole program duration—because SCPs are shorter than bachelor’s programs.

This situation is inequitable for several reasons. Students in SCPs are more disadvantaged than those in bachelor’s programs and hence have greater financial needs. SCPs have lower dropout rates than bachelor’s programs, which means that a greater subsidy is devoted to students who are more likely to drop out. And, among bachelor’s students, those who graduate come from higher income families than those who drop out and hence need the subsidy even less.9

Neither is SCP funding equitable for students at private HEIs. In LAC, on average, these students account for 48 percent of total SCP enrollment and mostly pay tuition out of their own pocket (chapter 1). Although public HEIs are highly attractive because of their generous tuition subsidies, many students might have legitimate reasons to choose private HEIs. For example, local public HEIs might be oversubscribed, not offer the student’s program of interest, or

offer low-quality programs. As a result, subsidizing SCP students at public but not private HEIs creates inequities among students. Crucially, because public HEIs might not have enough capacity for a potential SCP expansion, private HEIs might be indispensable to absorb the increased demand.10 In other words, the large-scale upskilling and reskilling of the workforce required in the current emergency might only be possible by subsidizing students in public as well as private HEIs.

The concern remains, for many, that public financial aid for students in private HEIs might flow to low-quality programs. Of course, public funds might flow to low-quality programs taught not only at private but also public HEIs. Averting this concern requires that funding and regulation complement each other— vigorously overseeing all programs—to identify the low-quality ones and prevent public funds from flowing into them.

Given the current fiscal constraints, it is not realistic to consider additional funding for higher education. Instead, raising subsidies for SCP students requires more efficient public spending in higher education, including a funding reallocation among higher education students based on their income and program type. Restoring equity in higher education funding would matter in any circumstance but is crucial now, since the COVID-19 pandemic has affected individuals unequally and deepened the already high, persistent inequality in the region.

Fiscal constraints, along with the need to expand SCPs, indicate that public resources alone might not suffice. Expanding student loans—whose current coverage is low—would provide additional resources. Income-contingent loans, provided by public or private entities, is an option worth exploring. With these loans, the student pays once she starts working, but only to the extent allowed by her income. This type of loan is almost nonexistent in LAC at the moment.11 Nonetheless, boot-camp providers in the region already provide incomecontingent loans to students, as they finance students’ training and begin to collect payments only when the student gets a job.12

Another funding option might operate through the social protection system. Given policy makers’ current concern with protecting employment, subsidizing employment conditional on the employees attending an SCP would fulfill both employment and human capital goals. This is similar to the well-known conditional cash transfers (CCTs), in which households receive a cash transfer as long as they fulfill certain conditions such as sending their children to school. Well-designed and implemented CCTs have been successful at increasing school attendance and enrollment.13

More generally, the pandemic has shown the need to redesign social protection systems to include funding for skill development, since skills are the ultimate insurance mechanism.14 For example, SCP funding could be used as a countercyclical tool—or an automatic stabilizer—that rises during recessions as more individuals, particularly those who are out of employment, need to upskill or reskill. Given that some fields of knowledge (such as science and technology) command a higher program cost than others, an efficient use of public funds would provide a different per-student funding by field. Since private HEIs tend