Education Finance and Economics

Dr. Purushothaman
November 29, 2013


Education is a very essential aspect and should be provided to all students in a country equally. In this respect governments should take initiatives of financing education in order to allow students from poor background to be able to access education. For instance, in the United States of America education is primarily under the responsibility of state and local government. This topic is of great importance as it analyzes the historical and theoretical foundations of funding education. Evaluation of sources of revenues and their influence on educational results is also addressed in this study. Some light shed to educational institutions, local, and state government in matters relating to education in a global perspective. More light is shed on the determination of capital and general expenditures of educational institutions and an analysis of the role of ethics in the process of making the financial decisions for educational institutions.

Additionally, the aspect of how government and educational institutions make budget and manage it in order to help in adequately financing education is of great importance. Finances for supporting education come from different avenues which include grants and other financial aids from different sources (Xuedong, 2008, p. 52). In this case, this study will address these sources and indicate how they impact the aspect of education. In the current world and economy, expenditures of parents towards their children is reported to increase drastically as a result of the increasing cost of education. Because of economic conditions of different countries all over the world, it has become very difficult for parents and students to finance their children's or their education respectively (Alan, 2010, p. 52). This calls for economic policies that are implemented by governments in ensuring that all citizens are equally provided with education. Economic policies ensure that there is a portion of the governments spending on public that is allocated for education financing.

Historical perspective of financing education

A number of changes have occurred in the education systems of many countries in the whole world, as indicated by Alan Haskvitz (2010), particularly in matters relating to financing education (p.58). Most striking aspect has been the sharp drop in the public share of funding higher education and the recent interest in financing based on institutional performance. This has resulted in educational institutions particularly higher education to raise their tuition fees, cut costs by outsourcing services to external providers, and aggressively seek private finances. This has impacted the way these educational institutions provide equality of opportunities when enrolling. Despite the fact that the state government funds education in many countries of the world, there are some people who study in private schools and hence they provide their own funding. This shows that the rationale of state funding is to equalize the whole process in the pursuit of making sure that students from all social classes are in a position to assess education (Allan et al, 2009, p.538).

Back in the year 1789, Thomas Jefferson was for the idea of free public education that was deemed imperative for the new democracy to grow and thrive. Despite the fact that Jefferson pushed very hard for free public education, he never witnessed government-funded public education during his time. According to Alyson (2011, p.17), there is need for government budgeting for public education in order to bring about equality in school enrollment. This is because some educational institutions particularly the higher education discriminate upon the poor students as they are unable to pay for their tuition fees adequately (Arnove & Torres, 2007, p.384).

In general terms, education systems have undergone a number of changes right from the roles played by tutors, students, parents, governments, educational institutions, and other sources of educational finance. These changes have occurred through a long period of time and what can be seen in the present is totally different from what was there in the past. As indicated by Azad and Chandra (2008), in the past education was heavily financed by parents and students and no one could have thought that education would be financed by other financial aids (p.33). During this period of time, the cost of education was relatively low and hence many people were able to afford it. In the current world and economic conditions, educational financing has become very difficult bearing in mind that many people are enrolled in educational institutions and hence there is a need of increasing the number of tutors. It should be noted that, as put forward by Bayefsky and Waldman (2007, p.523), the advancement in technology that is experienced in the current world has attracted many people to join educational institutions in order to further education and other to start education. In the United States of America for instance, more than 75% of the total population are educated meaning that this country has developed heavily in terms of education (Brossard & Borel, 2008, p.23). In most of the developed countries like Australia, Japan, United Kingdom, France, and Germany among others; people are increasingly acquiring education and hence there are a lot of students in public and private educational institutions hence calling for increased number of tutors.

According to Boadway and Shah (2007), in the traditional days most people were not educated and hence the government was able to pay for the few people's educational expenditures in most countries (p.41). This implies that the cost of education in the traditional days was not high. In the current world, a lot of people are acquiring education through public, private, and e-learning means and hence there is need for technological advancement and other facilities to aid education and hence making the cost of education to be very high. As a result of this many governments are usually not able to afford to finance education for their citizens and hence parents and students are supposed to finance their education. Taking an example of financing education in Canada, it is clearly indicated that universities in this country finance education through sale of goods and services, investments, and fund raising (Cancian & Danziger, 2006, p.320). This is one of the ways that was used in funding education in most of the American countries. Traditionally, many governments had absolute role of financing education and hence many people were able to attain even higher education through the financial aids that were provided by governments. In the current world, as revealed by Brux (2007, p.107), a good number of bright students in developing and less developed countries are unable to join higher education because of lack of financial assistance from governments. This has resulted to low levels of education in these countries (Checchi, 2006, p.260).

There is an attempt to finance education for students according to their performances in many different schools. This aspect has been heavily criticized by many people especially the proponents of equality in educational financing (Christopher & Robert, 2010, p.189). It should be noted that even in the traditional days, education was provided by private and public educational institutions and hence parents used to take their children to any of the two aspects depending on their levels of wealth. According to Cohen et al., (2007, p.13), education was traditionally financed by local governments where localities used to handle all financing for the schools in their communities. The source of revenue was from property tax. In this respect, schools relied on the properties owned by each community. This method of education funding had shortcomings in that students transferring from one school to another particularly within different communities were considered as out of place (Cordes et al., 2005, p.100). This is because community properties were only used in funding education of students who come from that community. In this respect, students were indirectly forced to study in schools within their community if at all their education was to be financed by community properties (Craford, 2005, p.32).

After the World War II, different countries took the responsibilities of financing education for their citizens through a number of plans so that all students' education was financed equally. This method was viewed by many people as the right path to excel in education since students studying in private and public schools were equalized in terms of educational funding (Dahlman et al., 2007, p.95). In the present situation of education financing, governments are almost contributing up to 50% while the rest is provided by parents, students, organizations, financial institutions, or even non governmental organizations. This present aspect has been viewed by many parents and students as discriminating as those people who are not able to finance for their education are forced to drop out (Dauchy, 2007, p.34). The aspect of the governments contributing up to 50% of education funding has resulted to low qualities of education as tutors are not adequately motivated to impart educational skills to their students while students from poor backgrounds are in most cases sent home because of finances. This, as indicated by Dustmann et al (2008, p.230), has contributed to the increased private education hence students in private schools perform better as compared to those in public schools.The reason given for this aspect is that in private schools there are technologically advanced facilities and well trained tutors hence students are able to learn both theoretical perspectives and practical ones. In the developing countries in particular, it has become very hard to equate the quality of education in private and public schools since the modes of learning and teaching are totally different (Elizabeth et al, 2010, p.31).

Presently, the most common mechanism of education financing is known as Foundation Program which was introduced in the year 1920. According to this program, the local and state funds are combined in order to provide a level of funding that is adequate for financing education for all people (Fleet, 2010, p.243). Most countries of the world use this method where education is funded by state and local governments' financial aids. In order to equalize the process of education funding to all communities, this program provides that the poorer communities are entitled to a bigger share for the state and local government's money as compared to richer communities (Goldin & Katz, 2008). This is done in order to make sure all communities are eligible for the money and all students from all communities benefit from these money. It should be noted that this method also includes the calculations that are incapacitated in meeting the requirements and needs of students requiring special education. In most countries of the world, students with special education are usually financed by the government especially if their parents are unable to fund their education (Gruescu, 2007, p.67).

According to Guarino (2009), apart from the funding that is provided by governments in the present situations, there are other sources of education financing (p.16). The World Bank is supporting many countries' education with an aim of making sure that all students are provided with adequate education equally. It has come to the knowledge of many people that education is one way that changes the economic conditions of a country. This is so because when people are heavily learned in a country that country does not necessarily look for expatriates from other countries (Hanushek & Welch, 2006, p.96). Taking examples of the industrialized and developed countries in the whole world, it is clear that the level of education in these countries is very high as more than 80% of the total populations are educated. As a result of this, the World Bank and other financial institutions are heavily funding education sector especially in the developing and less developed countries (Honig, 2006, p.273).

Many governments usually give grants to students in order to enable them pay their education. In this case flat grants are offered where the available state funds are divided either by the number of students or teachers in a country in order to give a unit figure and then give out the appropriate figure to each school in that country (Horner, 2007). This method is very helpful as it assists in financing education in a country in accordance to the number of teachers or students in that country. Many students especially in the United States of America, United Kingdom, Australia, China, and Japan have benefited heavily from this program (Hyman, 2007). The rationale that education is a responsibility of a government is mostly used by many governments to fiancé education. In this case, when governments are making annual budgets for the public spending, education financing is included in order to make sure that all students are provided with adequate education. In most countries of the world, the aspect of education is compulsory to all students and hence since there are some families that are very poor to the extent that they are unable to finance education for their children; it becomes the responsibility of the governments to finance their education (Imber & Geel, 2009 p.343).

Expenditures and the increasing cost of education

The public expenditures are increasing at a very high rate in the current world resulting from the constant changes in economic conditions. Despite the fact that economic conditions in the whole world are deteriorating, many parents and students are increasingly spending a lot of money in financing education especially higher and special education. According to Lawrence (2008, p.56), parents are spending a lot of money during the educational life time of their children and it may seem that in the near future many people will not be in a position to afford education especially those people from the lower social class. It is widely known that when economic conditions of a country deteriorate, people usually change the way they spent their money in order to try and save. This is not the case in matters relating to education since education is becoming a basic need and all people are striving to have it (Lin & Pleskovic, 2008, p. 30). According to the reports that are provided by non governmental organizations and World Bank, many people in developing countries are living below one dollar and they are expected to pay educational expenditures for their children. This is very difficult and unless something is done to solve this problem, people will not be able to afford quality education in the near future (Lioyd, 2005, p.101).

The rising cost of education is compounded by the fact that the associated expenditures of education are very many and too much for governments, parents, and students to bear. These expenditures include; operational human resources, operational learning, investment infrastructure and maintenance of the aspect of free education by governments, management costs, and assistance costs like bursaries and grants (Lipphardt, 2008, p.30). Globally, higher education is facing a lot of problems where universities are underfunded, there is increasing worries about compromising quality of education, there is inadequate student support in terms of bursaries and grants, the amount of students from disadvantaged backgrounds is very small, and the aspect of financing education is regressive (Lou & Wang, 2008, p.143). This indicates that probability of having unstable education in the whole world is very high bearing in mind that the poor will be the most adversely affected. The proportion of students from disadvantaged backgrounds in institutions of higher education is very small as a result of the fact that they are unable to finance their own education despite the fact that they are bright and talented (Martin, 2005, p.221). A good example can be traced in the United States of America when state spending for higher education dropped and the tuition that was required rose significantly making many people unable to afford this education. It is believed by many people that college education or rather higher education is an investment that pays off. This has resulted in many people willing to study up to colleges but their dreams are usually put off by the fact that higher education in the whole world is increasingly becoming unaffordable (Martinson, 2008, p.56). This increased cost of education has called for financial aids from different sources in order to help governments, parents, and students in paying tuition fees and other required fees.

The Principles and Theories of Economics of Education

The main role of economists in education mostly relates to the labor market and the utilization of money. In financing education economic theories and principles like cost benefit analysis need to be addressed. In cost- benefit- analysis, the main agenda is analyzing the cost of financing education and the benefits this education offers to the general public. This principle is used in determining whether the policy of funding education is worth or not. This is simple, if the benefits of a program are higher as compared to the costs; the program is worthwhile (Martinson, 2008, p.56).

The second aspect is efficiency which involves getting the maximum out of the valuable resources available. In this respect, efficiency is obtained if maximum outputs are obtained from the same inputs. This implies that the efforts that are put in financing education should be reflected on the outcomes of this education. Efficiency is an aspect where resources are distributed with an aim of giving productive results (Robert, 2010).

The Role of Federal, Regional, and Local state governments in financing education

The role of financing education is mostly played by state, federal, and state governments. These roles usually differ with the level of education. In most cases, regional and local governments in almost all countries of the world finance low levels of education like pre-primary and primary education. On the other hand, tertiary and higher educational levels are financed by central or state government. Government usually takes the responsibility of financing public education to a larger extent as opposed to private schools (Dougherty, 2004). Before the current economic down turn in the whole world, governments used to provide more than 70% of the total expenditures in education institutions. The concept of inter-governmental funds transfer happens when governments support their citizens studying abroad.

Financial Organization

This denotes an organization that collects money from other institutions or the general public and invests them in financial assets. In this case, this may provide a good source of funds for education in any one country they are found (Robert, 2010). Additionally, this aspect may mean the collect way to organize finances that are provided to support education in order to accomplish their goal. Naidu, Joubert, Mestry, Mosoge and Ngcobo(2008), describe all organizations need to have a structure that shows how management functions are carried out. It therefore makes sense that a governing body, which is responsible for the management of school funds, sets up a financial committee. In the creation of an organizational structure for school financial management the requirements of school act must adhered to (p.171).

Financial Control Strategy

Financial management is the performance of management actions (regulatory tasks) connected to the finance of schools or educational organizations with the main aim achieving effective education. These activities comprise of part of the individuals in official positions of authority. Financial management is an integral aspect of resource management. It ensures that expenditure is well-directed towards achieving good value for money involving appropriate acquisition and allocation of physical resources. Other activities that help achieve this include the use of budgets, planning and resource control (Levacic, 1989, p.7). Financial mismanagement can be reduced if a policy is drawn up to set out the regulations, practices and procedures necessary for the prevention of fraud (Knight, 1993, p. 150). Financial control is concerned with money as it flows into the school financial resources (such as cash) held by the organization, and money flowing out in the form of salaries and expenses. Each of the categories of financial resources is controlled so that revenues are sufficient to cover expenses. Berkhout and Berkhout (1992) noted the following specific functions be performed for control purposes:

Comparison between the amounts of budgeted and the result achieved
Analysis and interpretation of discrepancies
Audit and calculation
Accounting and reporting
Implementation of corrective measures.

Income and expenditure must be monitored and controlled. Monitoring is the process of comparing actual income and expenditure against budgeted income and expenditure. Whilst control safeguards funds and ensures that they are spent as authorized (Watkins, 1989:86; Knight, 1993: 147). The roles and responsibilities of individuals within the school need to be spelled out and information should be reported regularly (cf. Naidu, Joubert, Mestry, Mosoge and Ngcobo, 2008: 176).

In order to make sure that all finances that are provided are used for the intended purposes, it is very essential to come up with a strategy top control utilization of finances. In this case, finances meant for educational support should not be used in other ways. This calls for the correct appropriation of funds in order to avoid operating at a loss (International Monetary Fund , 2006).

Financial Accounting and Reporting

Financial accounting and reporting are also forms of control (Naidu, Joubert, Mestry, Mosoge and Ngcobo, 2008, p.179). In order to make sure that representatives of educational finance are accountable and responsible for all the money provided to particular schools, the aspect of financial accounting and reporting is very imperative. All the money that has been used in educational institutions is recorded and reported as a way of showing transparency. This prevents mismanagement of funds and brings about appropriate utilization of finances (Dougherty, 2004).

Financial Policy in Education

Different countries of the world have different financial policies but all of them are directed to assist in the improvement of education and financing education. Different parties especially those involved in matters related to finances in education sector are guided by these policies. As noted by Naidu, Joubert, Mestry, Mosoge and Ngcobo (2008), the financial policy serves to guide the financial administration of the school. It assists with financial control, regulation of receipt-keeping and withdrawal and expenditure of funds. It is an important financial management tool, clearly outlining how funds and (including school fees, donations, other generated funds and government grants) are to be managed at a specific school (p.173). Additionally, the process of government funding education and the portion by which a government should contribute is provided by this policy.

Sources of revenue and their influence of education outcome

Equity in education funding is generally defined as the aspect of equal per student expenditure in all school districts. Differences in expenditures among different school districts are typically brought about by a function of local tax rates and revenues. According to International Monetary Fund (2006, p. 59), it is very interesting, inspiring, rewarding, and exciting experience when studying in most of the developed countries but it may be very difficult to fund ones education. The concept of the state government partly paying education has resulted in parents and students paying a higher proportion of the cost of education as compared to other countries (John, 2006, p.36). Among the groups that are adversely affected by the increasing cost of education are the international students as they are not covered by any government grant. It would be cheap if the local government at district level was in charge of funding education as they are far much aware of the conditions of students in these schools. This is so because, as stated by Dougherty (2004), the local community is aware of the earning levels of parents in a certain district and hence they are better positioned in determining how these schools should be funded (Jones, 2007, p.36).

According to Joseph (2010, p.206), education is very essential in all countries of the world and hence it should be supported heavily by all avenues of revenues. In the less developed countries, it is very hard for the government to fully finance education and hence other financial aids are called upon to help in this matter. It is the responsibility of many governments all over the world to ensure that their citizens are adequately educated in order to contribute to the development and growth of economy and hence there are different means that are sought to finance education. It is of great importance to note that developed countries like European countries are able to finance education for their citizens either directly or indirectly. This aspect has increased the need to many people from other parts on the world to enroll in education programs of these countries through the e-learning programs.

It has been reported by Kerzner (2009, p.45) that, the cost of education all over the world has increased drastically and it has become a fact that most of the poor people have to rely on fundraising in order to be able to fund their education. Governments are unable to fully finance education because of the increased costs of education and this has left people to manage and pay for their education. In order to have a full, adequate, and high quality education in the whole world, it is of great importance to address the following aspects; budget management, grants, financial aids from different sources, expenditures and the rising cost of education, and the economic policy that are implemented in order to aid education financing.

a) Budget management

The aspect of budget management implies that the money that is allocated for a particular purpose is well appropriated and utilized in the defined purpose. It should be noted that in some countries schools are very corrupt and hence the money that is allocated for financing education in these schools are used in other activities that are not the intended ones (Lawrence, 2008). In order to make sure that all students are well provided with adequate education it is the role of representatives of different schools to ensure that the amount of money allocated for different schools are well utilized. This is only brought about if people will become accountable for the money allocated for their schools are become very responsible in spending them (King, 2008, p.103).

Everard, Morris and Wilson (2004, p.210) explain that investment can either take the form of developing or maintaining existing resources or acquiring new resources. The question is: how do we invest limited financial resources so as to maximize the benefit to the school? This question is especially pertinent to disadvantaged schools, where the money provided hardly covers year-to-year financial and resources needs. For this reason school governing bodies are subjected to difficult choices in relation to resources. The appropriateness of decisions by governing bodies in this regard depends on how well these bodies are informed and skilled in resource management (cf. Naidu, Joubert, Mestry, Mosoge and Ngcobo, 2008:164)

According to Xuedong (2008, p.56)), in China the government has initiated the aspect of compulsory education in the rural areas of China and hence in the budget there are some amounts of money that are appropriated for financing rural education. This implies that governments are in the front line in financing education by setting aside some parts of the public money for education (Lin & Pleskovic, 2008, p.30). It should be noted that as a result of the deteriorating economic conditions in the whole world, educational sector is not provided with much money from the government as most governments only provide 50% of the total educational financing. This shows that the money provided should be well managed and used according to the set budget.

It has been indicated by Lioyd (2005, p.101) that, the formula funding method that is used by some countries in education funding results from the budget that is made by governments in supporting education. As indicated earlier, in the past education financing was a full responsibility of the governments where the governments made budgets on the appropriate amount of money that should be appropriated to educational sector. In the current world, this budgetary appropriation has reduced and hence the little money issued should be well utilized (Lipphardt, 2008, p.30). In most cases, since most of the money used in education financing comes from governments' budget management, accountability and responsibility is required in order to have adequacy and equality in education funding. On the other hand, there are portions that are appropriated by many governments in order to help students undertaking higher educational programs. This money is paid back once a beneficiary is employed.

b) Grants

In most countries, students are provided with grants and bursaries depending on their situations and the course they are undertaking. Grants are provided by governments in order to help students that are unable to pay for their tuition fees (Martin, 2005, p. 221). The difference between grants and budget management is that grants are provided and given to particular students who are considered needy while budgetary finances are provided direct to educational institutions in order to help in purchasing facilities and equipments that are used in the process of schooling. According to Lou (2008, p. 143), students in public schools in China are provided with governments grants in order to be able to manage paying their school fees. This is a process which is considered very useful sine grants are not necessarily paid back. Bursaries are similar to grants as they serve the same purpose but the only difference is that they are issued to people pursuing particular courses or careers (Martinson, 2008, p.56).

Financing education as a concept has undergone an underlying structural change from the former centralized system which had narrow revenue source to a decentralized system that is heavily diversified in terms of revenue base (Nicholas, 2009, p.205). Due to the fact that most countries have compulsory education especially for primary education, governments provide grants to enable all people be able to advance their education to the secondary and tertiary level (Megumi, 2008, p.7). The aspect of globalization and advancement in technology has resulted in many students from all over the world going for abroad education or e-learning. In order to support this aspect of education, governments are issuing intergovernmental grants.

According to Nikos (2010, p. 41), intergovernmental grants are usually based on a number of interconnected choices which include; the national government decides whether to provide grants for its students studying abroad, the national government determines the conditions under which these grants should be issued, the sub-national government makes decisions on whether to accepts the issued grants, and the sub-national government determines policies which include the spending levels on the received grants. This implies that, there must be an agreement between the national and sub-national governments on whether to provide or receive grants respectively (Norman et al., 2011, p.233). Through grants students are able to acquire education from foreign countries and hence increase the resource base of their countries.

c) Financial aids from different sources

It has been noted by OECD Indicators (2008, p. 37) that, the cost of education in many countries is increasing at a very high rate and hence there is a need for education financing to be assisted by different financial aids. In this respect, sources like International Monetary Funds and World Bank are playing a very significant role in supporting education in different countries especially the developing and less developed countries. A good example that is provided by International Monetary Fund (2006, p.59) is Rwanda which is receiving a lot of financial support from International Monetary Funds in order to support its education. Most of the African countries are heavily supported by international monetary institutions in order to finance their education. These sources are viewed by many people as good ways of enhancing education through providing adequate and equitable education. In most cases, as noted by John (2006, p. 36), research institutions and higher learning are provided with financial support from international monetary institutions in the pursuit of improving and enhancing research and higher education especially in developing and less developed countries.

World Bank has invested a lot of money in financing education in Africa and hence many students have benefited heavily from these investments. According to Jones (2007), it is the responsibility of the World Bank to ensure that the borrowed funds that are intended to finance education in different countries reach to the intended beneficiaries. This is because some people are very corrupt and may end up using this money for other purposes. It should be noted that the funds that are provided by the World Bank are paid back and hence they should be used appropriately in order to meet the intended purposes (p 36).

In most cases, International Monetary Funds support higher education in order to eliminate the perspective that only the elites are eligible to education particularly in developing and less developed countries. The aspect of globalization is taking the concept of education financing up to the global level and international monetary institutions are taking the front line in assisting the poor to get accessibility of education (King, 2008, p.103). A pint worth noting is that education is increasingly becoming under funded and hence it becomes very costly to be afforded by the poor (Joseph, 2010, p.213). This has been the main course of action of the international monetary institutions like the World Bank and the International Monetary Funds (IMF).

d) Economic policy and Education finance

Economic policy is not a direct source of revenue for financing education since it does not involve collecting money but involves appropriate use of public money. From a general perspective, economic policy is the actions that are undertaken by governments in the economic field. These actions involve systems of setting government budget, labor market, national ownership, and interest rates among other areas of government intervention in the economy. Megumi (2008, p. 13) notes that economic policies are usually influenced by global institutions like the World Bank, International Monetary Funds (IMF) and political issues and beliefs. In education financing perspective, economic policy many be implemented by governments in order to regulate the average spending of students especially higher education students provided with grants and financial assistance by the government. According to Nicholas (2009, p.207), most students spend a lot of money in unnecessary extravagant lifestyles in institutions of higher learning hence increasing government spending in this type of education. In this case, this spending may be reduced by the government in order to make sure that students are spending the right amount of money that is proportional to an average life of an ordinary higher education student (Nikos, 2010, p. 233).

On the other hand, economic policy involves the attempts made by a government to stimulate economy out of recession. As indicated earlier, the increased cost of education has resulted from the recession that is facing many countries in the world. In this respect, many governments are not able to management their budgets and allocate money to educational sector. Norman et al., (2011, p.229) note that economic policies are used in redeveloping economic conditions of a country in order to be able to finance education. This is done through taxation and tax policy where a government may decide to tax higher its citizens in order to afford financing its education (Phillippe & Sullivan, 2006, p.127).

It should be noted that according to Keynesian theory of economics, government spending and taxes are guided to redevelop the economy of a country. The other aspect is monetary policy which controls the value of a currency in a country by usually lowering the supply of money in order to control inflation and raising it so that the country's economy may be stimulated. OECD Indicators (2008) reveal that, inflation rates of a country directly impact the accessibility of education and average educational related expenditures (p.37). In this respect, in countries where inflation rates are very high students, parents, and governments usually spend a lot of money in financing education. It is therefore the role of the government to make sure that the amount of money in circulation is heavily controlled in order to stimulate economy and prevent increase in the rates of inflation (John, 2006, p.33).

Challenges facing the concept of financing education

The concept of funding public schools has been challenged heavily in the courts throughout the past 40 years. In this case, the main issue is how equal funding of public education is carried out in the process of providing equal education to all students (Richard, 2010, p. 153). These adequacy issues are centered to the academic standards and assessments. This is because some public schools are funded on the basis of how students perform at school. Poor students may perform lower than affluent ones because they do not have adequate learning resources(Robert, 2010, 47).

It is becoming very hard for governments, parents, and students to finance education and hence other financial aids are called up on to assists. As a result of this the field of education is becoming very competitive and for the elites only who are able to afford paying tuition fees (Roberts, 2010, p.209). The aspect of many sources of revenues coming together to fund education is somehow welcomed with a number of challenges. These challenges are typically reducing the morale of these financial institutions and governments to provide funds for education (Rye, 2008, p.25).

The aspect of corruption and misappropriation of funds is a challenge that is adversely affecting the concept of financing education. In this respect, some people are not accountable and responsible when using government's money that is provided to support education (Sidlow & Henschen, 2010, p. 68). In most countries because of lack of accountability and responsibility, the money that is supposed to finance education is being used for personal gains or in other fields that are not the actual intentions. According to Schwartz (2007,), education financing is faced by the problem of misappropriation of funds hence resulting to some people being unable to afford education while in the real sense their education is financed (Smart, 2008, p. 6).

In the current world, human populations have increased and the national economies have reduced. This implies that in most countries population levels are not proportional to economic levels and as a result of technological advancement, many people are increasingly enrolling for higher education. In this case, governments are facing the problem of financing education for huge populations in their countries. In developing countries as indicated by Snider (2010) learning facilities for nursing are very minimal as compared to the number of students taking this course. This indicates that it is becoming increasingly difficult for financial aids to adequately appropriate money for the increasing populations of students (Sykes et al, 2009, p.27).

Developing countries are not like developed countries where almost all people are able to afford education and hence almost all students in developing countries are relying on financial aids from governments and international monetary institutions in financing their education (Theodore, 2010 p. 84). The aspect of individuality is affecting the concept of education financing. In this case, some people feel that they are rich enough to finance education for their children and hence do not require any support from the government or any other source.


In winding up, financing education in the whole world should be reviewed as it has become very costly. It is the wish of many parents to have their children provided with free public education but many governments do not apportion large amounts of funds for funding public education. The cost of education is increasing in the whole world and hence students are nearly failing to afford education in most countries. It should be noted that when education costs are high, students are not able to study appropriately as they keep on thinking where they will get the money for their education.These thoughts usually affect the performances of students. There are many ways through which education is financed in developed and developing world. These include; government budget management, through grants, financial aids from other revenues like International Monetary Funds and the World Bank, and also through economic policies that are implemented by governments in order to check inflation rates and stimulate economic conditions of a country.

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