It is foreigners who help us survive

V4 private sector education relies on students from abroad.

Julie Daňková and Martin Ehl
27 August 2015

Education business is on the rise in Central Europe. This has become increasingly evident for the last generations who benefitted from free public education: they are now witnessing both private and public schools being forced to look for additional income following budgetary cuts and demographic decline. Education costs and the market are tougher than ever.

Let’s first take a look at the once-thriving private sector of so-called diploma factories.” Private higher education schools began to emerge in the countries of the V4 during the 1990s, experiencing real expansion after 2000. They catered to the huge demand for higher education that came in the wake of socialism, when only a small and select part of the population could study. Many people did not get a chance at a title due to high competition or inappropriate “class origin.”

Moreover, these private institutions introduced the opportunity to study new subjects such as management, marketing, and IT. Gradually, the demand for higher education from employers in both the private and public sectors grew. For example, nurses were obliged to get university degrees, and the Czech state paid school fees for nursing students to private colleges and higher vocational schools.

This environment has created huge business potential and private schools have boomed. They have served as an alternative in offer and capacity to public schools, and they have filled market gaps. For example, in the Czech Republic, there is no public college for the hotel business, and, therefore, this demand is met by the private Institute of Hospitality Management in Prague.

Acccordingly to its size and population, Poland has the highest number of private colleges and universities in the region. Their quality varies, but although the highest-ranked are public schools, there are also some high-quality schools among the private schools.

The ranking of Polish private higher education institutions is dominated by Kozminski University in Warsaw, with the University of Social Sciences and Humanities in Warsaw (SWPS) in second place. “Its name does not suggest it, but this school has the widest range of subjects and quite famous teachers who are often quoted,” declares one of its former students.

The success of Kozminski University is unique in Central Europe. For example, in the Financial Times Ranking, which covers the best European Business Schools, it takes forty-first place, the best

among the schools of Central and Eastern Europe. It has acquired the prestigious international accreditations of AACSB and EQUIS. “Unlike private schools in the Czech Republic, Kozminski University decided to follow the Western model of elite education. It has concentrated on building a prestigious MBA program and adult education programs, which they provide in cooperation with foreign schools,” says Hana Machková, rector of the University of Economics Prague. Polish schools are, however, a prime example of demographic decline, which is affecting all V4 countries. “Just last year, about forty private schools were closed in Poland,” says Piotr Arak, an analyst of the Polityka Insight think tank. “Private schools in Poland focus on economics, humanities, and IT. Prices are comparable with those offered by public schools. Cheaper schools want only a few thousand zlotys. In general, the majority of schools have financial problems and debt, but there are no official reports and such troubles are quite often hidden.”

It increasingly looks as though private schools are a second choice. The end of conscription in 2009 was a huge blow to private schools in Poland, as they were no longer in demand as havens from the draft.

The end of the golden age

There are more private than public schools in the Czech Republic, but not more students in them. There are forty-four private colleges and universities with almost 44,000 students, but there are more than 300,000 students at twenty-eight public and state schools. Czech private schools also offer mainly economics and the humanities, which are cheap.

While some interest remains, the golden age of private schools is over in the Czech Republic. For example, the biggest private Czech university, Jan Amos Komensky University Prague had almost 10,000 students in 2011, and its pretax income was around 350 million crowns. But in 2013, it had 6,600 students and a pretax income of 237 million crowns. Such a good result is an exception among Czech private schools; the profits of others do not exceed ten million crowns and some schools are in the red.

“For some time, education was financially attractive to founders of private schools and they had good economic results, but now, public schools cover more or less the same educational areas and many private schools do not have enough students to continue their work,” says Professor Peter Baláž of the University of Economics in Bratislava on the general situation in the V4.

According to Rector Machková, it was a strategic mistake that Czech private colleges during the boom did not concentrate on institution-building, but on profit. “Unlike Kozminski University, private schools in the Czech Republic went the way of the highest possible cost cuts. Their primary investment was not big enough, they tried to attract as many students as possible, and did not built their own teacher teams. The result is that the majority of staff teaches there on a part-time basis and naturally does not invest real interest in building the institution,” says Machková.

The situation in Slovakia and Hungary is similar. “The most prestigious rankings do not go to private schools, but to big state universities like mine,” says Gábor Halász, professor of education at ELTE University in Budapest. Government policy is not helpful to private schools in Hungary. “The policy environment is quite discouraging. The government says quite explicitly that it does not like private services in education. It does not even like the term ‘service’. There has even been a linguistic change in legislation: we are ‘serving’ society (as in civil service), not ‘selling’ to society,” says Professor Halász.

How to make money

Private schools are struggling to improve their standing and secure their future. Their number one priority is attracting foreign students. “When there is a lower number of high school graduates, there is the possibility of attracting foreign students,” explains Petr Kolář, vice-rector of Jan Amos Komensky University Prague.

Another possibility is building a whole education system under one umbrella. The University of Finance and Administration, a private school from Prague, has brought this model to the Czech Republic. It offers education from kindergarten to elementary and high school, through university. This idea has already been put into effect by the Ostrava Business School. “We have opened a private business academy at high school level. This strategy works, I meet the same people later in the corridors,” says Rada Jünger, executive director.

Many schools also offer specialized courses of interest to companies and public institutions, which private schools are able to prepare quickly and tailor to specific needs. At least two of the aforementioned strategies – attracting foreign students into paid programs and developing adult education – have also been implemented by public schools, which likewise need to improve their financial picture in the face of overall cuts to public budgets. And these can offer better rankings and stronger traditions, and have at least part of their budgets secured from the state.

“There are only a few countries in the world that fully cover higher education. In recent years, in general, there has been more discussion of cost-sharing in higher education – from parents, families, and foundations,” says Liviu Matei, provost and vice-rector of the Central European University in Budapest.

For example, in Poland pay those who study in evening or on the weekend or postgraduate studies have to pay. “Those who pay for their studies, pay a few thousand zlotys for humanities or tens of thousands for medical and pharmaceutical faculties. Technical schools do not ask because it would be too expensive for Polish students,” says Piotr Arak.

Public universities in the Czech Republic and Slovakia receive some income from adult education and foreign-language programs, which are fully covered by all students. “Slovak schools were quite active in making money on foreign students. They have lobbied for the provision that programs in any language other than Slovak be paid. In 2013, schools in Slovakia received more than 23 million euros from foreign students,” said Renata Králiková, an analyst for the Slovak Governance Institute, an NGO.

We see the same trend in Hungary. “There is competition and a market for adult education that is profitable, sometimes significantly so. Higher education institutions are also entering this market; my university also provides such programs. These are typically vocation-oriented,” says Gábor Halász. Technical universities also have the opportunity to gain income from projects with the commercial sector and from spin-off companies.

Among regional public schools, the most motivated to search for additional income are those in Hungary. This is an absolutely necessary condition for them to operate, as the state budget covers only two-thirds, or even less, estimates Professor Halász. “Sources of income in order of significance are: fees from non-regular students (those studying part-time), research (typically acquired under competition from the state budget), and lastly EU funds and development programs. Increasingly, regular students must also pay. The system is such that the state defines the number of ‘state-paid’ students. Typically, educational institutions take more students, but there are areas in which the state has completely halted support; for example, programs in economics are completely without state funding. All students in economics pay fees,” explains Gábor Halasz.

Foreigners welcome here!

It seems that one of the most important factors for the survival of higher education schools are foreigners who pay. Schools from the V4, both private and public, are fishing in the same waters. Students from the West are most often interested in medicine, those from the East mostly in economics. Medical schools have the longest tradition in teaching foreigners. According to the Polish Ministry of Education, the international success of medical schools has been significantly supported by the fact they have accreditation from schools in the United States. Polish technical schools have also taken this path to make themselves more attractive to foreigners. Czech medical schools harness the good reputation of medical education in the Czech Republic. Interestingly, Norway has calculated that paying for medical education for young Norwegians in the Czech Republic is less expensive than increasing the capacity of domestic schools in Norway. However, some examples from Slovakia have recently shown that the education of foreigners should have its limitations. Slovak Denník N daily has shown huge differences between conditions of admission for Slovaks and foreigners to public universities. While admission requirements for Slovaks remain quite tough, foreigners – mainly Greeks – are usually all admitted.

Public schools have even started to cooperate in attracting foreign students. The rectors of five public schools in Prague recently agreed to cooperate in attracting foreign students. A result of this is the shared web platform “Study in Prague,” which provides information about education programs and student life in Prague. “Study in Poland” is a similar program.

Peter Baláž points out one specificity among Czechs and Slovaks: “Czech schools cover the decline in numbers of students to a certain extent by increasing the number students from Slovakia (around 25,000) and other countries, because Czech colleges and universities have the highest quality among the four countries,” he says.