More efficiency and fairness from loan-financed tuition fees

The Federal Constitutional Court in its judgement of 26 January 2005 has freed the way for university tuition fees. Now it is a matter of a practical and just implementation. This article argues that tuition fees as such need not be unfair. The key factor is how they are paid. If the fees are paid ex ante, students from low-income families may not be able to afford a university education since they can offer no collateral for borrowing money on the credit market. The problem of family background is eliminated is the state finances the fees and passes the costs on to the students in the form of a loan. This loan can be repaid when the former student takes on a job, depending on income, thus financing the university education from later income. Similar models have already been introduced in other countries, of which the models in Australia and Britain are presented here.