Universities Struggle Amid Tuition Freeze

With tuition fees frozen for 17 years, Pusan National University (PNU)’s revenue has been shrinking, while its reliance on government funding continues to grow each year. Experts highlight the drawbacks of the tuition freeze and stress the need for improvements in the government’s financial support system for universities.

According to PNU’s financial statements from 2018 to 2023, the prolonged tuition freeze since 2009 and a decline in the student population have led to a yearly decrease in educational revenue—which includes tuition and admission fees. Educational revenue accounts for approximately 46.2% of the university’s self-generated funds, making it the largest component. Other self-generated revenue categories, such as application fees and thesis review fees, usage fees and service charges, asset sale revenue, interest income, and other income, etc. are structurally difficult to increase significantly.

Educational revenue, which amounted to 140.36 billion won in 2019, dropped to 131.66 billion won in 2023, marking a decrease of approximately 8.6 billion won. Meanwhile, fixed operating costs, including salaries and utility expenses, have risen annually. Among these expenditures, personnel costs take up the largest portion. Salary expenses increased from 119.38 billion won in 2018 to 123.9 billion won in 2023, reflecting a 4.5 billion won rise. While the number of enrolled students fell from 28,715 to 27,126 during this period, faculty and staff numbers increased from 3,907 to 4,062. This growing gap—between declining tuition revenue and increasing personnel costs—puts the university's financial stability at risk.

The Division of Finance and Accounting reports that compared to 2009, when tuition fees were frozen, tuition revenue has decreased by 9.4 billion won, while rising utility costs have added an additional burden of 29.2 billion won. An official from the Main Offices stated, “While tuition revenue is declining, the university’s basic operating costs continue to rise, weakening the university’s financial sustainability. The prolonged tuition freeze may lead to reduced investment in university resources, ultimately undermining the quality of education and research.”

■Limited Autonomy in Financial Management

With few options for increasing revenue, national universities like PNU are becoming increasingly dependent on government funding. According to PNU’s financial reports and consolidated financial statements from 2018 to 2023, the university's dependence on the central government (central government transfer revenue / total revenue × 100) was 38.1% in 2018, 40.1% in 2019, 41.5% in 2020, 45.5% in 2021, 40.9% in 2022, and 41.8% in 2023, marking a 3.7 percentage point increase over five years. In contrast, the reliance on tuition fees (educational activity revenue / total revenue × 100) stood at 33.4% in 2018, 31.4% in 2019, 29.9% in 2020, 26.6% in 2021, 27.5% in 2022, and 23.9% in 2023, reflecting a 9.5 percentage point decline over the same period.

The core issue is that government funding comes with strict allocation requirements, which significantly limits universities’ flexibility to deploy resources according to their actual needs. The higher a university’s reliance on tuition fees, the more funds it can independently utilize, securing financial stability and administrative autonomy. In contrast, central government funding is primarily allocated as project-specific grants restricted to particular purposes, resulting in relatively limited financial flexibility.

Lee Jeong-Mi (Prof. of General Education, Chungbuk National University) highlights that national university funding is segmented into categories such as salaries, basic operating expenses, Improving national university lecturers’ treatment, expanding laboratory equipment, supporting administrative duties of professors, research performance bonuses for teaching assistants, practical training support for specialized universities, ICT advancement projects, and facility expansion. These funds are earmarked for specific purposes and cannot be freely allocated to areas where universities may need them most. Although the National University Development Project allows some operational flexibility—permitting up to 20% of funds to be used for general expenses—most of the funding remains tied to specific government initiatives, limiting its effectiveness in supporting overall university operations.

Furthermore, concerns persist over the adequacy and stability of government support. Prof. Lee’s research points out that national university funding is regulated across multiple laws, including the Higher Education Act and the National University Accounting Act, Ordinance on the Establishment of National Schools, creating inconsistencies and making funding levels unpredictable. Since most of the budget is allocated as project-based funding rather than operational expenses, universities face uncertainty each year depending on shifting government policies. In 2021, the National Council of Presidents of National and Public Universities highlighted this issue, stating, “Only half of essential operating costs—such as lecture fees and utility bills—are covered, and not all salary and lecturer compensation expenses are reimbursed, placing a significant financial strain on universities.”

■Government Funding Model Deepens Inequality Among Universities

The National University Development Project’s funding model has also been criticized for deepening financial disparities between universities. When the initiative was first introduced in 2018, 80% of the budget was allocated upfront, with only 20% linked to performance evaluations. However, the current model provides only 50% of funding in advance, with the remaining 50% distributed based on performance-based incentives. Critics argue that this system disproportionately benefits wealthier universities, exacerbating the gap between institutions.

Kim Hun-Ho (Prof. of Education, Kongju National University) explains, “Universities with limited financial resources struggle to make initial investments, making it difficult to meet government performance standards and secure additional funding. Meanwhile, well-funded universities can leverage their existing resources to achieve high performance, allowing them to receive even more funding through incentives.”

This project, which functions more as a “performance-based project fund” than a general financial aid program, limits its effectiveness in addressing universities’ pressing needs—such as facility improvements and faculty hiring. Prof. Kim adds, “Enhancing the quality of university education and fostering long-term growth require stable funding for infrastructure and salaries. However, purpose-specific project funds have limitations in addressing these needs.”

The government’s recently introduced Regional Innovation System (RISE) initiative—designed to promote collaboration between local governments and universities—has also been met with skepticism. While RISE aims to support universities by fostering regional talent and stimulating local economies, Prof. Kim cautions that “RISE remains a locally driven, project-based initiative rather than a long-term financial solution. Universities will still struggle to secure the flexible, sustainable funding needed for stable operations.” Since funding decisions under RISE are determined by regional governments’ priorities, and funding is typically temporary, the initiative is unlikely to significantly ease universities’ operational cost burdens.

■Tuition Increases to Match Inflation

Experts emphasize the need for essential operational costs to be covered by the government while also advocating for tuition increases at least in line with inflation. Prof. Kim argues, “Tuition fees should rise in proportion to inflation. The current legal standard, which limits tuition hikes to 1.5 times the average inflation rate over the past three years, lacks a strong justification.” He emphasized, “Universities must be able to increase tuition in line with inflation to maintain even minimal standards of education and research.”

Additionally, there is a consensus that government funding models should shift from project-based allocations to more flexible, operational funding. Currently, the government prefers project-based funding because it allows for easier oversight and flexible budget adjustments. However, Prof. Kim points out that “Supporting operating expenses makes it difficult for the government to directly monitor university financial execution and creates the burden of continuous budget allocation, whereas project funding can be managed flexibly according to purpose, making it easier for the government to administer.” He concluded, “This approach alone makes it difficult for universities to resolve increasing operational cost pressures, so the government should expand operating expense support to ensure universities can operate stably.”

Reporter Jung Yoon-Seo·Ryu Hae-Joo

Translated by Seo Yoo-Jung