As things stand, public universities in the Czech Republic do not require students to pay tuition fees. But, unless there is an abrupt turn in the political tide, most observers anticipate that this situation will change over the next few years. Given the funding squeeze brought on by the pressure to expand the number of undergraduate and other student places nationwide, policymakers are now busy working on a plan for deferred tuition fees in which students would be bound to pay a certain percentage of the cost of their higher education once they had secured employment following graduation.

Though such plans have already been brought in across much of Europe, the move is bound to continue to cause a stormy domestic political debate, even though, as shown by a series of interviews conducted for this article, the idea that Czech university students currently pay almost nothing toward their studies is plainly wrong. Students, it seems, often get snagged by additional, often hidden costs.

 

 

A 25-year old student of the Third Faculty of Medicine of Prague’s Charles University, now in his fourth year of studies, said that when he first arrived at the university his passion for becoming a physician was somewhat interrupted by the sudden realization that his public education was not at all 100 percent free. “There were some necessities we needed to buy such as scalpels, a stethoscope and two cloaks,” he said, recalling how study costs quickly started to pile up. “Of course there are items, such as books, that one doesn’t have to buy, but in reality must as there are not many of them in the school library,” he added, saying that during his first year of classes he paid approximately Kč 9,000 (€ 350) for books on subjects such as anatomy, biochemistry and histology. “One cloak costs some Kč 800, stethoscope some Kč 500 to Kč 700, the cheapest and basic surgical scissors some Kč 400, and these are only examples,” he said.

 

The financial reality of studying at Prague’s Academy of Arts, Architecture and Design (VŠUP) is also not as kind to students as outsiders might expect it to be. “The school provides students with some services such as printing, but they themselves must pay for everything above these services,” said Luboš Drtina, a teaching assistant professor at the typography studio of the VŠUP graphics department. Drtina added that each student must compile a portfolio of works such as a series of posters for each semester. These cost around Kč 5,000 to Kč 6,000, but the academy can only contribute Kč 2,000 to this expense, he said. “This approach does not give us a transparent system,” Drtina remarked, saying he would instead like to see students paying a tuition fee that would cover all such costs.

 

Jarmila Kemrová, head of the department of studies at VŠUP, said any student should count on additional costs, especially when it comes to higher education institutions such as VŠUP. “No public university is free,” she said, adding that it was also important to take into account that the cost of educating a student at VŠUP is almost six times that of educating a student of law.

 

A response from Charles University concerning the costs incurred by medical students was not available at press time.

 

 

The state official in charge of making preparations for the introduction of the plan for deferred tuition fees that would oblige students to make a financial contribution to their higher education is Petr Matějů, head of the department of analysis and strategy at the Ministry of Education (MŠMT) and a researcher at the Institute for Social and Economic Analysis (ISEA). Matějů, who has been working on the tuition fee concept for 15 years, objects to anyone who imagines that public education can mean free education. Any student truly interested in a specific university should be familiar with the facts and realize that some costs are worth paying, Matějů said, pointing out that a post-graduate’s income from employment secured after their higher education is 74 percent higher than the income of the average person who has only made it through intermediate schooling. “The only thing that is free is the educational service the university provides the student with,” he added.

 

Some students agree with Matějů. Richard Gažo, who attends the University of Economics (VŠE), in Prague, said any study costs students need to pay are an investment in the future, so he has no problem with such expenses. Costs faced by students at VŠE are rather lower than those presented to counterparts at most other places of higher education, he conceded, while determining that he would welcome the introduction of a tuition fee system. “Generally I think that free education is a myth because the universities receive money from the taxes we all pay,” Gažo added.

 

Further examples of students having to pay out to meet nontransparent costs came from the Faculty of Law at Charles University. One graduate of the law faculty estimated that he had spent some Kč 12,000 on text books, referring to how the books in the university library cannot be taken home but can only be copied or read in the study room.

 

Student Alice Wollerová appeared relatively happy with the level of costs she has encountered during her studies for a degree at Charles University’s Faculty of Humanities. “We have many books here in electronic form, so therefore we don’t have to buy them,” she said. The university, she added, even pays for seven required five-day practical excursions.

 

 

The discussion surrounding the proposed tuition fees moved up the agenda Jan. 9 when Prime Minister Mirek Topolánek (Civic Democrat, ODS) said the declaration of the government program states that the debate should proceed. “Nobody is saying that it needs to remain a discussion without realization,” Topolánek said.

 

Matějů, whose work gained new momentum from the prime minister’s statement, said negotiations with the European Union’s European Investment Bank (EIB) took place last fall and three weeks ago with a view to establishing a tuition fee framework. The EIB might award the Czech state a loan for the introduction of a tuition fee fund that would administer student loans, grants and scholarships and also student repayments.

 

In their presentation to the EIB, ministry experts have presented students in the Czech tertiary educational sphere as financially dependent on their families, arguing that the implementation of the financial participation of students in their education should make them financially independent of their families.

 

CBW has learned that under the envisaged system Czech students would make deferred tuition fee repayments in relation to what income they obtain after graduation. Moreover, repayments would not be required until the student surpassed the national average income, currently Kč 21,470 according to November 2007 figures from the Czech Statistical Office (ČSÚ) “Then they would pay some 7 percent from their income,” Matějů said, adding that officials are also looking at an option that would mean graduates with higher incomes asked to pay a higher percentage.

 

“The upper limit of such a deferred tuition fee would be some Kč 20,000 yearly,” Matějů said, stressing that this would be the maximum amount and that at some universities the annual fee might start at around Kč 3,000 to Kč 5,000. The variant that is most likely to be recommended would see each institution set its own fee, but having no fee would not be permitted. “It would lead to unfairly enticing students with a free offer but possibly low quality education,” Matějů said.

 

The system being looked at has been inspired by arrangements that have been implemented in Australia and the U.K. (see box, page 29). It is based on principles of converting indirect financial support allocated to parents such as tax relief, child allowances, state social subsidies into direct support for students—universal basic grants and means-tested social stipends. The costs of the new system of social subsidies targeted directly at university students should not exceed the costs of the current direct and indirect support for these students and reckon with the introduction of affordable loans provided, guaranteed and collected by the state as well as the introduction of part-time work contracts for students that would be free of social and health insurance demands.

 

A stumbling block to winning parliamentary approval of tuition fee legislation could come from the presence of the Greens (SZ) in the ruling government coalition. Matějů and new Minister of Education Ondřej Liška (SZ) published a joint statement Jan. 3 saying the minister regards supporting Matějů’s team as a priority. Complications could, however, stem from the fact that the Greens promoted free public education prior to the last general elections and might not want to lose face with voters by agreeing to a U-turn. That is why prior to Topolánek’s statement Matějů told CBW that he was pretty sure that with the Greens as part of the management of the MŠMT there would be no introduction of a tuition fee requirement in public education.

 

Ondřej Gabriel, a representative of the MŠMT press department, said that the program of this government does not include tuition fees, but added that the government wants to “carry on with an intense and complex debate about their benefits and disadvantages” closely linked to the lowering of social barriers to university education. Gabriel made no mention of the policy divide between the Greens and the ODS on the issue. “I believe [the plan] won’t be implemented until 2010 because of the obstacles from the Greens, but we have to be prepared for the time when the political situation changes,” Matějů concluded.

 

 

Though some students may be able to hold a part-time job to pay for their higher education, while simultaneously passing all their exams with flying colors, not everybody is capable of doing this. The danger of temporary work commitments leaving the student with little time or energy to devote to course work is one clear reason why a comprehensive student loan offering should be easily accessible in the education sector. Poor parents financially incapable of contributing significantly to meeting the expense of their children’s education and students too proud to request contributions from parents without sufficient financial resources are other grounds.

 

Only a very lucky few obtain a scholarship, so at the end of the day much attention is certain to fall on the banks in terms of swiftly filling the gap in the finance market. Observers are now mulling over whether they are acting fast enough. “We are currently registering elevated interest from students in loans. … We assume this will rise further in the future,” said Tomáš Kofroň, a spokesman for Raiffeisenbank and eBanka, two banks currently undergoing a merger.

 

Česká spořitelna the country’s largest bank in terms of client numbers, said that around 200 students per month apply to it for a loan. But as things stand, many students refrain from pursuing loan enquiries, anxious that they have little idea of what they will be earning from the job that should follow their five years’ of studies.

 

This anxiety over future debt traps may, however, have to be disregarded more and more if the country does move to a tuition fee system. As Tomáš Kopecký, external communication manager for bank Československá obchodní banka (ČSOB) outlined, it will then not be largely a question of willingness or unwillingness to take a loan. “We think that taking a loan for studies will not be so much an issue of willingness, it will become an issue of necessity, mainly in regard to students coming from families with lower incomes,” he said.

 

 

The loyal client will never fall off a bank’s wish list and the student loan market certainly offers a lender the chance to take the “get ‘em while they’re young approach.” A student who enjoys a good loan experience with a bank during their university days might stay with that bank for decades. “Young people are very interesting for the bank, because [by giving a loan to a student] the bank can build a deeper relationship with the client in the future,” Kofoň noted.

 

MŠMT’s Matějů agreed. A bank looking to foster a prime client could begin well by offering a student customer a saving account geared for educational purposes, he said.

 

Komerční banka (KB), the largest bank in terms of assets, is another lender that is quick to state that it is firmly concentrated on young people. “The student segment is one of our main priorities. We regularly improve our products [for students] and follow the trends,” said Monika Truchliková, head of marketing for the KB’s retail banking department.

 

The only bank interviewed by CBW that is not yet giving such specific focus to the sector is ČSOB. According to Kopecký, it does not have a specialized product in this area. Nevertheless, he was said he was sure that as soon as ČSOB’s spots an opportunity to provide one, it will not tarry.

 

 

But sector analysts continue to mull over whether the banks will be ready with an impressive product portfolio from the word go if and when university tuition fees are launched in the Czech Republic. Petr Kříž, a leading partner for financial services in the Czech Republic for consultancy PricewaterhouseCoopers, is one observer who said he thinks they are pretty much on track. “I am convinced that the length of the development of such new products to be offered by the banks will not exceed the length of the legislative process that will necessarily follow the political decision [on going ahead with tuition fees],” he said. Though when discussion turns to particular loans closely oriented to student requirements, the consensus is certainly not so buoyant. While currently most of the banks seem willing to grant university students a loan, they usually don’t have any special product designed to fit the student’s detailed needs. That being the case, a student intent on covering costs with a bank loan must take a standard loan, offered with the standard interest rate and repayment conditions that are given to, for example, the typical middle-aged client with a stable job.

 

However, some banks have already sensed the profit opportunity in this market segment and have started offering student loans as a specialized product. Česká spořitelna offers the Hotovostní úvěr pro studenty VŠ (University Student Cash Loans) with the lending limit set at Kč 300,000 while Komerční banka’s Gaudeamus product has a Kč 500,000 limit. Student loans of up to Kč 1 million can be obtained from Raiffeisenbank and eBanka, and UniCredit Bank Czech Republic offers student loans of up to Kč 150,000. Other options for financing studies are obtainable from banks including Austria-based banks Oberbank and Waldviertler Sparkasse von 1842, and Poštovní spořitelna, a division of ČSOB.

 

Most of these loan offers come with advantageous interest rates and the possibility of beginning repayments on the principal at a time just after the studies are finished. However, interest payments must be made during the studies.

 

Another student financing option is offered by ČSOB. It enables a student to push the overdraft facility on a current account to as much as Kč 20,000. An advantageous interest rate is charged on the debt, and repayments need not be completed until one year later.

 

 

Graduates who evade repaying debts from their student years, sometimes even going to the extent of voiding loans by making questionable use of fast-track bankruptcy possibilities, have been a hot topic in the U.K. for several years now. The British university tuition fee system has been functioning for many years so those fearing the same situation will eventually afflict the Czech Republic are already pondering precautionary measures that could be introduced at an early stage.

 

Banks of course will have to arrange their own specific precautions. “How the banks will try to cover their credit risks will depend on how the tuition fee system will be set in the Czech Republic,” said Tomáš Pavlík, a spokesman for UniCredit Bank. One safety measure might condition the provision of a student loan on the securing of a compulsory underwriter. Kopecký, meanwhile, proposes that any loan recipient should identify a co-signer who would be bound to overtake the loan in the event of payment inability. “This [precaution] would also have some psychological effect on the student,” he said, observing that the co-signer would usually be a family member or friend.

 

Czech banks already offering student products say that they have not yet encountered significant repayment problems. “Studies enable the student to find a better-paid job, which means they don’t have problems paying the loan back,” Kofroň said.

 

 

Despite the quickening discussion on what role banks should play in meeting student loan demand, Matějů continues to argue that they should not be involved at all. “Student loans should not be given by banks, but by some state-administered fund. It should be the state that would award loans via this fund and extract the repayments,” he said.

 

The fund, he said, should cover the administration of social grants, social scholarships and study loans and collecting the deferred fees. “The state would warrant to the EIB, but would administer the fund alone,” Matějů said.

 

Though not yet inevitable, the emergence of a tuition fee system in the Czech Republic seems near guaranteed given the trend that has won the day in West European countries. Those desiring a university education will almost certainly have to make a contribution. But, as UniCredit’s Pavlík said, in the long run it should prove well worthwhile. “Education is an investment for the future. Needless to say, it is one of the most profitable investments,” he concluded.