THE IMPACT OF FREE EDUCATION ON ACADEMIC SUCCESS, SCHOOL CHOICE, AND OVERALL EDUCATIONAL QUALITY

Education is a wonderful thing. It allows individuals to acquire new knowledge, making them more competitive in the job market, and provides children from poorer families with equal opportunities to succeed in society as their peers from more privileged backgrounds. Education increases economic mobility and gives individuals the chance to achieve a higher status and a better life in society.

For these reasons, modern countries provide their citizens with access to directly free education.

My research focuses on how the concept of free education affects academic success, school choice, and overall educational quality. In this blog, I will briefly present my research and its findings.

Human Capital and Education

Human capital is defined as the sum of knowledge, skills, competencies, and experiences that individuals acquire through education and training. With a broader knowledge base, individuals can integrate into the labor market more easily, achieve higher wages, and contribute to economic growth and innovation. From the perspective of economists such as Theodore Schultz and Gary Becker, investments in human capital are just as important as investments in physical capital (e.g., machinery and infrastructure).

The Impact of Free Education on Demand

The main driver of consumer behavior is price—when price ceases to exist, behavior changes significantly. Subsidies or complete "free education" artificially lower the cost paid by the end user. In education, where the government covers the costs, students are not directly exposed to real price signals, leading to increased demand. However, because consumers do not consider all costs, market imbalances arise, influencing behavior in the system:

• Longer study duration: A student who does not bear the cost of repeating a year is less motivated, which has been shown to extend the duration of studies.

• Less concern about quality: When there is no direct financial risk, less attention is paid to selecting higher-quality programs.

Free education thus brings a dual problem: moral hazard and adverse selection, as students do not feel pressure to make rational decisions regarding their educational path.

Moral Hazard and Adverse Selection in a Free Education System

Subsidization or free education leads to moral hazard, where individuals increase their exposure to risk because they do not bear all costs. Just as a car owner without additional insurance parks more carefully, students who do not feel direct costs do not weigh whether their chosen field is economically viable or whether they should complete their studies on time. Government subsidies obscure the real costs of additional years and frequent program changes, leading to irrational behavior—students prolong their studies, frequently change programs, or enroll merely to delay entering the labor market.

In addition to moral hazard, adverse selection arises, where a greater number of individuals who are not genuinely interested in education but wish to delay labor market entry join the system. Consequently, the costs of prolonged studies are transferred to society.

Government Management and Its Impact on Educational Quality

So far, I have focused solely on how "free education" affects consumers, but part of my research also examines how government management of education affects its quality.

State-funded and managed education follows a centralized model, where the government designs curricula, finances institutions, and sets conditions. However, this model presents several problems:

• Lack of competition: Since tuition fees do not exist and direct price signals are absent, natural competition does not develop among educational institutions, preventing continuous innovation, curriculum updates, and improvements in teaching methods.

• Slow curriculum updates: Centralized curriculum design leads to slower textbook and syllabus updates, negatively affecting the system’s adaptability to rapid labor market changes.

• Costs of inefficiency: Government management transfers the costs of failure and suboptimal decisions to society as a whole. If students prolong their studies or choose less profitable programs due to the absence of financial pressure, taxpayers bear the costs.

  
  

CREDO Study

The CREDO study, which collected data from 31 U.S. states, Washington, D.C., and New York, compared students in charter (private) schools with demographically and academically comparable peers in traditional public schools. Key findings include:

• Charter school students achieve, on average, between 6 and 16 additional days of academic progress per year—6 days in mathematics and 16 days in reading.

  
  

  

  
  

• Another significant finding is that charter schools receive approximately 30% less funding than public schools yet still achieve better results. This suggests that a competitive and less centralized system can lead to greater efficiency and innovation.

  

  
  

These findings indicate that a system with competition fosters improvements, while a centralized and free model without clear price signals leads to stagnation.

Italian Study: The Impact of Tuition Fees on Study Completion Time

In my research, I analyzed the findings of an Italian study focusing on how increasing tuition fees affects study completion time.

The results show that an increase in tuition fees in the fourth year significantly reduced the probability of students graduating later than the expected time. Specifically, a €1,000 increase lowered this probability by approximately 6.1% from the initial value, where as many as 80% of students were late graduates.

Both the CREDO study and the Italian research suggest that competitive and financially structured education systems can improve outcomes. Charter schools examined by CREDO receive less funding than public schools but still achieve higher student progress. The Italian study clearly demonstrates that raising tuition fees in the final year of study encourages students to graduate faster and work harder academically. Both studies confirm that financial incentives and competition are crucial factors in raising the quality and efficiency of education, which could serve as a guideline for improving domestic education policies.

Conclusion

Education enables individuals to acquire knowledge, making them more competitive in the market and opening opportunities for social mobility, especially for children from poorer backgrounds. In modern countries, the system is centralized and free, which at first glance seems positive but also brings hidden issues.

The absence of financial consequences leads to prolonged study durations, as students do not feel pressured to consider the economic viability of their chosen field or timely graduation. The lack of price signals also affects school choice, as decisions are based mainly on personal interests, leading to inefficient resource allocation.

Government management and the lack of competition further lower educational quality, as the state system restricts choice and establishes a monopoly over formal education. The government provides free access through taxpayers, but individuals often do not take appropriate responsibility, contributing to lower efficiency.

The purpose of this research is not to transform the free education system into a paid one but to show that the current system is based on inadequate incentives and lacks accountability. Here are some measures the state could implement to improve the education system:

• Introduce partial tuition coverage for students who do not complete their studies within the expected timeframe.

• Require reimbursement of all costs from those who do not complete their education.

• Increase incentives (e.g., scholarships) for high-achieving students.

• Introduce vouchers that would allow private institutions greater participation in the education system.

Since this blog is only a brief presentation of my research and does not cover everything in detail, I encourage you to read the full research paper. In the future, I plan to write another blog post elaborating on the measures the government could take.

What do you think?

Do you agree that the education system should implement penalties, incentives, and encourage greater competition among schools? How do you think the introduction of financial incentives and sanctions would impact the quality and efficiency of education? I look forward to your opinions and comments! Also, please share this post on social media, as I have dedicated a great deal of time to this research.

Research paper

SŠ_ekonomija_Vpliv brezplačnega šolstva na akademski uspeh, izbiro šol in splošno kakovost.

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