Tuition at Private Academic Institutes

On the recent move by a private academic institute in Seoul to annul the order of the Gangseo District Office of Education to adjust tuition, the Seoul Administrative Court ruled in favor of the plaintiff, saying, “Tuition should be left to the market unless the academic institute in question is clearly raking in illegal profits.” The institute teaches elementary and middle school students English and math and reported charging a monthly tuition of 290,000 to 690,000 won (237 to 562 U.S. dollars) to the education office. It sued when ordered to lower the fee to alleviate the burden of private education on parents. Since 2006, authorities have ruled in favor of institutes in all five lawsuits on tuition filed against education offices.

Previous administrations have paid particular attention to preventing tuition from rising given public sentiment. Under the slogan of “war against private education,” the incumbent Lee Myung-bak administration also introduced a “private institute paparazzi system” that rewards those who report illegal practices by institutes. Through January this year, 24,000 cases have been reported since the system was adopted in July last year and 1.7 billion won (1.4 million dollars) in rewards has been paid. The administration’s regulation on private institutes is stronger than those of previous governments. While many parents agree that rises in private institute tuition should be prevented, many opponents say the government’s excessive regulation violates market principles.

In line with the government’s measures to lower tuition, the Seoul Metropolitan Office of Education introduced a system on setting an appropriate level of tuition in December 2008. A Seoul National University study commissioned by the office found that the appropriate tuition level for most private institutes should be higher than now. Just as the price of fuel drops at gas stations when the price of gasoline they sell is unveiled, private institutes will likely face intense competition that makes it hard for them to charge excessively high tuition.

Education offices decide on the level of tuition adjusting for inflation after determining tuition per minute. They do not consider rent, personnel expenses and the number of enrolled students. An outstanding instructor cannot charge more under the extremely inflexible system. The ruling can be interpreted that market principles should also be adopted by private institutes as long as excessive profiteering is prevented. Competitive institutes can attract more students with relatively higher tuition, and those faring poorly will drop out of the market. Education offices should design new policies for regulating tuition in line with the rationale behind the latest ruling.

Editorial Writer Chung Sung-hee (shchung@donga.com)