Education Finance

Education finance is a system through which the government and organizations ensure the funding of the overall education needs of children and youth by developing facilities and institutions for their schooling and higher education from the public revenue collected through taxes, philanthropy, and tuition fees. The nations, with the support of organizations like the World Bank, UNESCO International Institute for Education Planning, and the Global Partnership for Education (GPE), take various initiatives to foster education finance and policy for increasing the literacy level worldwide. The primary principles of education finance are equity, quality, regional parity, and efficiency in the education system.

The Education Finance Watch (EFW) 2023 facilitates a sneak peek into the education expenditure trends until 2021, following the COVID-19 pandemic. Notably, the low-income countries witnessed an increase in total education spending in 2021, primarily due to a surge in government contributions, which accounted for 50% of the total spending in this category. Despite this uptrend, it failed to address the learning disparities caused by the pandemic globally. This report was developed collaboratively by the World Bank, Global Education Monitoring Report, and UNESCO Institute for Statistics, and the data was drawn from diverse sources such as the WB, UIS, IMF, and OECD.

The students can search for various funding options to meet their education expense requirements. Some of the common forms of education financing include:

1. Private Student Loans: Financial institutions like credit unions and banks facilitate higher education finance by offering student loans to candidates who wish to pursue further education. However, such financing is more expensive than the Federal loans.
2. Federal Student Loans One feasible form of this finance is the Federal loan offered to students for schooling up to their graduation. These can be direct subsidized or direct unsubsidized loans with low interest rates.
3. Work Study Programs: These programs are specially curated to help students become self-dependent by allowing them to fund their schooling and graduation expenses by working part-time, usually at their school or college campus.
4. Scholarships and Grants: The Federal, state, and local government, schools, colleges, and other institutions offer various grants and scholarships for education to eligible students based on their requirements, merit status, and athletic achievements.

Education finance loans and other options have been changing the lives of millions of students worldwide. The need for this social and governmental system can be gauged through the following examples:

Example #1

Suppose Mandy is a Nigerian student. She completed her commerce graduation in 2023 and now aims to pursue a Master's in Business Management from Harvard Business School in the USA. However, neither she nor her family could afford her education expenses. Therefore, she applied for the Harvard Business School (HBS) need-based scholarship as a means of higher education finance and got the total tuition fees waived for studying at the institute.

Example #2

The World Bank has set an objective to diminish learning poverty, focusing on children aged 10 who struggle to comprehend a basic story. Over 10 nations have collaborated to launch the global platform for education finance, to tackle obstacles to education financing. This initiative, undertaken with contributions from various entities, intends to engage experts to collaborate with low—and middle-income nations. While low-income nations allocate $200 per child annually for education, high-income nations allocate $8,000. 

The Democratic Republic of the Congo encounters the challenge of four million out-of-school children due to financial constraints. Indeed, Paraguay has set aside $1 billion from natural resource revenues to enhance education quality. Moreover, the platform emphasizes four core principles: sustainable financing, efficiency, accountability, and capacity building. Its objective is to halve the proportion of 10-year-olds unable to read by 2030. Moreover, Peru's education financing reforms have resulted in enhanced learning outcomes—such an initiative endeavors to shift the perception of education financing from mere expenditure to a long-term investment.

Education financing is a social and political means of funding schooling and higher education in the nation. It has the following significance:

• Ensures Resource Mobilization: The education financing efforts help the government and the World Bank to efficiently allocate and mobilize the financial and in-kind resources for the development of the education system.
• Responsible Fund Utilization: Such initiatives aim to use public funds or revenue responsibly for the betterment of society and the economy.
• Career Goal Attainment: When individuals have the means to complete their schooling and higher education, they become skilled and knowledgeable to select a career path and move ahead in that direction to fulfill their career objectives.
• Personal Development: It nurtures individual and interpersonal growth by facilitating lifelong learning since education is a necessity that adds a comprehensive value to people's lives, their families, society, and the economy.
• Makes Education More Accessible: Education finance is critical for ensuring that such an essential facility is available and affordable to everyone, whether rich or poor.
• Better Job Creation: It aids individuals in pursuing their dream careers and securing advanced degrees and certifications to become competent candidates. Their growing skills and expertise improve the condition of the job market, thus enhancing the pay scale with better employment opportunities.
• Alleviates Earning Potential: Education is equal to earnings, and therefore, since education finance fosters learning, it opens up ways to generate higher income in the long run.