Financing of higher education institutions by the Länder
Public higher education institutions are, with a few exceptions, maintained by the Länder, and are supplied by these with the funds they need to carry out their work from the budget of the Ministry of Education and Cultural Affairs or the Ministry of Science and Research. The financing procedure usually comprises several stages of coordination between the responsible ministry and the higher education institutions. First the higher education institution notifies the Land authorities of its finance requirement in the form of an estimate to be included in the budget of the Land ministry responsible for higher education. The entire budget is then compiled by the competent minister by agreement with the other responsible ministries and finally included in the budget proposals the government presents to parliament for its approval. The funds are made available once the parliament has discussed the budget and adopted it. Financing is generally oriented in accordance with the responsibilities of and services provided by the institutions of higher education in the field of research and teaching, in the promotion of up-and-coming academics, in the area of internationalisation and the equality of opportunity for women in science. The Land distributes and spends the funds according to requirements within the institution, a process which is again supervised by the Land.
In some Länder, framework agreements on development and funding for institutions of higher education are concluded between the Land and its institutions of higher education for a period of several years. The framework agreements define, for example, the objectives of the Land, the structural development of the institutions of higher education, the expansion plans, the strategic performance and development goals, taking into account the tasks regulated by law and their achievement, the type and scope of state funding for institutions of higher education and the further development of the budget management and management of higher education institutions. This procedure is intended to increase the planning security of the higher education institutions.
In 2021, according to the financing statistics, the public sector expended Euro 33.9 billion on higher education institutions. The Länder share was Euro 29.2 billion, or 86.2 per cent of expenditure, while the Federation share was Euro 4.7 billion or 13.8 per cent of expenditure.
Financing of higher education institutions by Federation and Länder
The funds provided by the Länder from their budgets cover personnel and material costs as well as investments, in other words expenditure on property, buildings as well as for first and major equipment. These funds are supplemented by the grants and third-party funding from industry described below.
Following an amendment of the German Basic Law, the Federation and the Länder have had additional scope for action in the joint promotion of science since January 2015. Pursuant to Article 91b, paragraph 1 of the Basic Law, in cases of supraregional importance, they may now thus mutually agree to cooperate in the promotion of science, research and teaching. This means that institutions of higher education can now also be supported permanently by federal funds, whereas this only used to be possible through fixed-term programmes such as the Higher Education Pact 2020 or the Excellence Initiative. Agreements between the Federation and the Länder which primarily concern institutions of higher education require the consent of all Länder.
In June 2016, the Federal Government and the Länder concluded an agreement on the promotion of top-level research at universities (Excellence Strategy) as a successor to the Excellence Initiative launched in 2006. For the first time, this programme makes use of the possibilities offered by the amended Article 91b of the Basic Law (GG) and now provides for the continuation of the promotion of excellence on a permanent basis.
The continuation of the Excellence Initiative which aimed to train top performers in research and to raise the quality of Germany as a location for higher education and science across the board, further strengthens top university research. Within the scope of the Excellence Strategy to encourage top-level research at universities, the Federation and Länder will provide a total of up to Euro 533 million annually as of 2018 in the two funding lines “Excellence Cluster” and “Excellence Universities”. As in the Excellence Initiative, 75 percent of the funds will come from the Federation and 25 percent from the Land in which the sucessful university is located. In the Excellence Clusters funding line, a total of around Euro 385 million will be made available for the project-related funding of internationally competitive research fields at universities or university alliances. Project funding of around 45 to 50 excellence clusters will be provided. The funding period is generally two times seven years. In the Excellence Universities funding line, a total of around Euro 148 million will be provided to permanently support eleven institutions. The selected universities will undergo an independent and external evaluation every seven years, the results of which decide whether funding is to be continued.
In September 2018, 57 clusters of excellence at 34 universities were selected for funding from 1 January 2019. With the selection of the clusters of excellence, the second part of the Excellence Strategy was initiated. Universities with at least two or university consortia with at least three clusters of excellence could apply for funding as universities of excellence until the end of 2018. Since November 2019, ten universities of excellence and one excellence consortium are funded.
In November 2022, the Federal Government and the Länder agreed on a further development of the Excellence Strategy in the Joint Science Conference of the Federation and the Länder (Gemeinsame Wissenschaftskonferenz – GWK). In particular, funding of Euro 539 million per year will be made available for up to 70 clusters of excellence to strengthen the competitive space from the second funding period onwards. From 2026, a total of Euro 687 million per year will thus be available in the Excellence Strategy. It remains the case that 75 percent of the funds come from the federal government, 25 percent from the respective host state of the cluster of excellence or the university of excellence.
Funding Initiative “Innovative Institutions of Higher Education and Programme to Support Up-and-Coming Academics"
In addition to the Excellence Strategy, the Federation and Länder resolved two schemes in June 2016: the funding initiative “Innovative Institution of Higher Education” and the programme to support up-and-coming academics.
The initiative “Innovative Institution of Higher Education“ to support the research-based transfer of ideas, knowledge and technology helps institutions of higher education that already have a coherent strategy for their interaction with business and society to raise their profile in their so-called third mission “Transfer and Innovation”. The initiative has been endowed with Euro 550 million for ten years and is aimed particularly at Fachhochschulen as well as small and medium-sized universities. The Federation provides 90 percent of the subsidies, the respective home Land 10 percent. At least half of the funding and at least half of the funding cases should be allocated to Fachhochschulen or consortia coordinated by a Fachhochschule. In the first of two funding rounds, whose funding period is maximum five years, 48 institutions of higher education were selected in 19 individual and 10 collaborative projects. Funding for the projects started on 1 January 2018. The Federal Government and the Länder are providing up to Euro 285 million for the second funding round. In May 2022, a total of 55 higher education institutions were selected for funding in 16 individual and 13 collaborative projects. These include 39 Fachhochschulen, 3 colleges of art and music and 13 universities and Pädagogische Hochschulen.
The goal of the Federation-Länder programme to support up-and-coming academics that has been endowed with Euro 1 billion is to make the career paths of up-and-coming academics at universities and equivalent institutions of higher education easier to plan and more transparent. It aims to improve the international appeal of the German scientific system and help the universities and equivalent institutions of higher education attract and permanently retain the best junior scientists from home and abroad as far as possible by encouraging the tenure-track professorship, an internationally recognised and accepted career path to a professorship. The Federal Government provides up to Euro one billion for the programme, while the host countries of the funded universities provide the overall funding. The 1,000 new Tenure Track Professorships funded by the Federation are to be advertised again and again and maintained by the Länder in the long term. At the same time, the Länder will increase the number of permanent professorships by 1,000.
Higher Education Pact 2020
In 2007, in order to enable institutions of higher education to cope with an increasing number of new entrants and to maintain the efficiency of research at higher education institutions, the Federation and the Länder on the basis of Article 91b, paragraph 1, No. 2 of the Basic Law adopted the Higher Education Pact 2020 (Hochschulpakt 2020). Through the Higher Education Pact, the Federation and Länder have created a needs-based range of courses, thus ensuring the quantitative expansion of higher education.
During the term of the Higher Education Pact from 2007 to 2020, around 1.6 million more prospective students were able to take up higher education studies than would have been the case without the provision of additional study opportunities. The term of the Higher Education Pact 2020 ended on 31 December 2020, the funding phase runs until the end of 2023. Over the total duration of all three programme phases of the Higher Education Pact from 2007 to 2023, a total of more than Euro 20 billion from the Federation and about Euro 19 billion from the Länder will flow to the universities.
Contract for the Future of Higher Education and Teaching
The Zukunftsvertrag Studium und Lehre stärken (Contract for the Future of Higher Education and Teaching) is intended to succeed the Higher Education Pact 2020 in ensuring that study place capacity is maintained in line with demand and that the quality of studies and teaching is high. The Contract for the Future of Higher Education and Teaching is intended to succeed the Higher Education Pact 2020 in guaranteeing that the capacity of study places is maintained in line with demand and ensuring the high quality of studies and teaching. At the same time, institutions of higher education gain financial planning security. In particular, permanent support can be used to promote the expansion of permanent employment contracts for staff involved in study and teaching. The Federal Government will provide Euro 1.88 billion for the The Contract for the Future of Higher Education and Teaching in 2021 and 2022. The Joint Science Conference of the Federation and the Länder decided in November 2022 that this amount will be dynamised in the years 2023 to 2027. Thus, around Euro 338 million in additional federal funding will be made available during this period. The Länder will provide additional funding in at least the same amount, so that the Zukunftsvertrag will provide institutions of higher education with a total of around Euro four billion annually to promote studying and teaching.
Federal-Länder Agreement on "Innovation in Higher Education Teaching"
Since 2021, the agreement between the Federation and the Länder "Innovation in Higher Education Teaching" (Innovation in der Hochschullehre) concluded in June 2019 as the successor to the Teaching Quality Pact (Qualitätspakt Lehre) promotes the further development of higher education teaching and its strengthening in the higher education system as a whole. To this end, the Foundation for Innovation in Higher Education Teaching (Stiftung Innovation in der Hochschullehre) was established under the auspices of the Toepfer Stiftung gGmbH. Appropriate funding formats are intended to motivate institutions of higher education to continue their efforts to improve quality and innovations in teaching and learning. In addition, the exchange and networking of relevant actors as well as the transfer of knowledge are to be supported. The Federal Government and the Länder are providing up to Euro 150 million annually to promote the Foundation for Innovation in Higher Education Teaching. Financing will be provided by the Federation from 2021 to 2023 and jointly from 2024, with the Federation contributing Euro 110 million and the Länder Euro 40 million annually.
Funding for Investment Projects at Institutions of Higher Education
With its funding to promote research buildings, large scientific installations and national high performance computing at institutions of higher education on the basis of Article 91b, paragraph 1, No. 3 of the Basic Law, the Federation aims to create the infrastructure for research of supra-regional importance. Up to Euro 316 million in federal funds are available annually for this purpose, which are supplemented by funds from the Länder in the same amount.
The prerequisite for funding research buildings is that the building is used predominantly for research, that the work is distinguished by special scientific quality, that the research is of supraregional importance and that the investment costs exceed Euro 5 million. Large-scale equipment can be funded if it is used predominantly for research and the procurement costs (including accessories) exceed Euro 200,000 (Euro 100,000 at Fachhochschulen).
Applications for the funding of large scientific installations are appraised by the German Research Foundation for appraisal.
Funding for national high-performance computing serves to provide level 2 high-performance computing capacities at higher education institutions on a nationwide basis and in line with demand, to strengthen cross-location and interdisciplinary cooperation, to strengthen the methodological competence of users, to promote young scientists and researchers, and to provide training and continuing education in scientific computing. On the basis of a competitive and science-driven procedure within the framework of a review by the DFG and an evaluation by an independent strategy committee appointed by the Joint Science Conference,nine computing centres have been selected by the GWK since November 2020 and included in the funding.
Female Professors Programme
The Female Professors Programme has been in place since 2008, with the aim of increasing the proportion of female professors at German higher education institutions and supporting female scientists in their careers. The programme is financed half by the Länder and half by the Federation and, following positive evaluations which showed that the programme had achieved its goals and, for example, that the proportion of female professors had increased more than expected, has now been continued until 2030. In the third programme phase (2018-2022), a total of Euro 200 million were available for the programme. Based on a new agreement between the Federation and the Länder, the fourth programme phase of the Female Professors Programme will start in 2023. The "Female Professors Programme 2030" will run for eight years until 2030 and has a total funding volume of Euro 320 million, half of which will be funded by the Federal Government and half by the Länder.
Financing of research at higher education institutions by external funding
The funds allocated from the budget of the Land ministries responsible for higher education are the main source of finance for higher education institutions. However, members of the institutions engaged in research are also entitled, within the scope of their professional responsibilities, to carry out research projects which are not financed through the Land budget, but by third parties, e.g. organisations concerned with the promotion of research. Competitively raised research funds, a significant portion of which is provided by the public sector, are increasingly supplementing the basic funding of higher education institutions. In 2020, the institutions of higher education received a total of around Euro 8.9 billion in external funding.
The most important institution involved in promoting research in higher education is the German Research Foundation (Deutsche Forschungsgemeinschaft – DFG). It promotes research projects by, for example, providing individuals or institutions with financial assistance. In 2022, the Federation and the Länder supplied funds of more than Euro 2.91 billion for institutional research funding through the DFG.
Higher education institutions also receive funds from companies, if the companies commission them with certain research and development work. In 2020, external funding from the commercial sector amounted to just less than Euro 1.5 billion.
Financing of Berufsakademien
The financing for training at state-run Berufsakademien is met partly by the Land and partly by the training establishments. Whilst the costs for the in-company training are met by the training establishments, the state Studienakademien (study institutions), where students receive the theoretical part of their training, are funded in full by the Land.
Financial Autonomy and Control
The strengthening of the autonomy of higher education institutions in recent decades has also led to a paradigm shift from detailed state control to self-responsible action by higher education institutions in the area of finance. The reforms primarily concerned distribution modalities. Budget funding is hence partly apportioned via performance-related parameters, taking into account such criteria as the number of students within the Regelstudienzeit (standard period of study) and the total number of graduates or the level of external funding, known as Drittmittel, attracted for research purposes and/or the number of doctorates. In this context, changes in the Higher Education Acts of the Länder have strengthened the governance structures of higher education institutions and increased their financial autonomy. The relationship between the state and higher education institutions is now, amongst other things, marked by agreements on objectives and performance requirements. Higher education institutions now have some scope as regards specific measures to implement the agreed objectives. They have also been given greater flexibility in the use of the funds thanks to the introduction of global budgets, for instance. In addition to their basic funding, higher education institutions apply for funds from public and private bodies to promote research and development and to support teaching and up-and-coming academics.
Fees within Public Higher Education
The Länder may, at their own discretion, impose study fees on students. After a number of Länder had charged these in the interim, general study fees have been abolished in all Länder. Baden-Württemberg will charge students arriving from outside the EU for the purpose of studying tuition fees of Euro 1,500 a semester from the winter semester 2017/18 onwards. Exemptions should ensure the social compatibility and international scientific exchange at the institutions of higher education in the Land.
Some Länder charge an administration fee for registration or a contribution for the use of the institution’s social facilities. If the institution has an organ of student self-administration (General Student Committee – Allgemeiner Studierendenausschuss) within the framework of a constituted student body (verfasste Studierendenschaft) (in all Länder with the exception of Bayern) students also pay an additional contribution. In some Länder, fees for long-term students, study courses providing continuing education and for an additional course of study are now being charged.
In view of the strong influx of people with a refugee background, the Standing Conference of the Ministers of Education and Cultural Affairs (Kultusministerkonferenz) discussed ways to reduce the costs of enrolment. The resolution of the Standing Conference from May 2016 on Access and Admission to Higher Education for Refugees – Possibilities for Reducing the Costs of Enrolment (Hochschulzugang und Hochschulzulassung für Flüchtlinge – Möglichkeiten, die für die Immatrikulation fälligen Kosten zu reduzieren) focuses in particular on those regulations that exist in the Länder that in principle enable the reduction of public fees, contributions and charges incurred in connection with attending an institution of higher education. With this in mind, the Standing Conference asked the Länder to work towards the institutions of higher education exploiting their option to facilitate the costs connected with enrolment in favour of the needy, with special consideration for the situation of refugees, in a reasonable manner and ensuring the principle of equality.
Financial Support for Learners’ Families
In addition to the direct support provided to students from low-income families by the Federal Training Assistance Act (Bundesausbildungsförderungsgesetz – BAföG), all students up to the age of 25 are supported through their families by the tax allowances or child benefits under the Income Tax Act or the child benefits under the Federal Child Benefit Act (Bundeskindergeldgesetz). In specific individual cases, the child supplement may also be considered. If students finish studying before their 25th birthday, the financial benefits enjoyed through their family come to an end with the end of the course of study.
Financial Support for Learners
Financial Assistance under the Federal Training Assistance Act
Students in the tertiary sector who have no other means (mainly from their parents' income) of maintenance and financing a course of study (Bedarf) can also receive financial assistance under the terms of the Federal Training Assistance Act (BAföG). Training assistance is granted to German students and also to foreign students who have a long-term prospect of remaining in Germany and are already integrated socially such as, for instance, students with a settlement permit or a perspective for permanent residency under the EU Freedom of Movement Law.
Since 22 July 2022, training must generally be commenced by the age of 45 in order to be eligible for support under BAföG. The duration for which such assistance is payable largely depends on the course of study chosen. The assistance limit corresponds to the standard period of study as stipulated in the respective examination regulations. From the fifth subject-related semester, students only continue to receive funding if they provide a certificate required for admission to examinations (Leistungsnachweis). The amount of the assistance is generally dependent on the income and assets of the student as well as the income of a spouse or civil partner and their parents.
At the beginning of the 2019/2020 winter semester, the 26th amending law to the BAföG raised the grant levels and income allowances, among other things. The financial assistance is also paid during non-lecture periods to meet students' requirements for that time. Students in higher education and at Akademien not living with their parents could from 1 August 2020 to 21 July 2022 receive up to Euro 861 per month (Euro 752 for their maintenance and accommodation, Euro 84 health insurance allowance and Euro 25 long-term care allowance), and where applicable a child-care supplement of Euro 150 per month for each child. With the start of the winter semester 2022/23, the 27th BAföG Amendment Act once again significantly increased the need rates and income allowances. Since 22 July 2022, students at universities and academies who do not live with their parents can now receive up to Euro 934 per month (Euro 812 for their living expenses and accommodation, Euro 94 health insurance supplement and Euro 28 nursing care insurance supplement), as well as a childcare supplement of Euro 160 for each child, if applicable. Half of the amount is provided over the maximum period for which assistance is payable as a non-repayable grant, while the other half takes the form of an interest-free state loan. Repayment terms for this state loan depend on social considerations and income. Only a maximum amount of Euro 10,000 had to be repaid. The 26th amending law to the Federal Training Assistance Act replaced this amount cap with a corresponding time limit of a repayment of a maximum of 77 monthly instalments of Euro 130 each.
Those students who begin or continue their studies in another EU member state or in Switzerland are funded as well. Study periods ranging from a minimum of one semester up to one year spent abroad outside the EU and Switzerland are funded if they are beneficial to studies and can be – at least partially – counted towards the training period, or are carried out within the framework of higher education cooperation schemes. In the latter case, a shorter period of at least twelve weeks is also eligible for support. In exceptional cases funding may also continue over a longer period. Compulsory placements may be funded from a minimum of 12 weeks abroad.
In 2021, 468,543 students received financial assistance under the Federal Training Assistance Act. Federation and Länder training assistance expenditure supporting students totalled over Euro 2.3 billion for the student sector alone. Students in receipt of assistance obtained an average of Euro 579 each.
Educational Credit Programme and Student Loan Programme
The support system is supplemented through the Educational Credit Programme (Bildungskreditprogramm) which can support pupils and students in an advanced stage of their training. This credit may also be approved alongside federal training assistance payments to fund exceptional expenses which are not covered by the Federal Training Assistance Act. Borrowers can freely choose up to 24 constant monthly instalments of Euro 100, 200 or 300 per training stage, subject to a maximum loan amount of Euro 7,200 per training stage. If the total limit of 24 instalments and the total amount of Euro 7,200 is not exceeded, a one-off payment of up to Euro 3,600 can also be applied for on request if the borrowers can demonstrate that they need the one-off payment, e.g. for special training purposes. Funding is only possible if the trainee is under 36 years old. As a rule students can only take up this credit until the end of the twelfth semester of study. The credit accrues interest as soon as it is paid out. However, interest is automatically deferred until repayment commences. The educational credit is applied for at the the Federal Office of Administration (Bundesverwaltungsamt – BVA) and disbursed by the Reconstruction Loan Corporation (Kreditanstalt für Wiederaufbau – KfW).
As part of the student loan programme of the KfW, since 2006, students of any study course are offered a loan in order to finance cost of living to the amount of Euro 100 up to 650 per month, irrespective of their income or assets.
Additional Means of Financial Assistance
In addition to financial assistance provided under the Federal Training Assistance Act, there are other sources of funding available to students. In some Länder, for example, the student associations at the institutions of higher education or the institutions of higher education themselves provide loans of varying amounts in cases of extreme social need. Several smaller, predominantly regional foundations, which usually have private funds at their disposal, also provide needy students with assistance. The student loan systems developed by the Länder are an additional support system for the promotion of academic studies.
Financial Assistance Through Grants
Particularly gifted and dedicated students can be supported with a grant from the thirteen organisations for the promotion of young talent supported by the Federation. The organisations for the promotion of young talent reflect the diversity of German society and mirror the various ideological, religious, political, business or union-based tendencies in Germany. The oldest and biggest organisation for the promotion of young talent is the German National Scholarship Foundation, which is also partly financed by the Länder.
The German Academic Exchange Service (Deutscher Akademischer Austauschdienst – DAAD) offers grants for foreign students and up-and-coming academics and scientists to pursue studies or further education of limited duration at a German higher education institution. Alongside the DAAD, some Länder also have special funds for providing assistance to foreign students at the local institutions of higher education.
Furthermore, gifted and high-achieving students at German institutions of higher education have been supported with the Deutschlandstipendium. The grant amounts to Euro 300 a month and is paid in equal halves by private sponsors (companies, foundations, private individuals) and the Federation. In 2021, around 29,000 students received a Deutschlandstipendium on the basis of the the Act on the Creation of a National Scholarship Programme (Gesetz zur Schaffung eines nationalen Stipendienprogramms – StipG).
On completion of a first degree, students may also receive scholarships to support their further studies in line with the postgraduate assistance acts (Graduiertenförderungsgesetze) and regulations of the Länder. The foundations for gifted students (Begabtenförderungswerke) also provide students who have already completed a first degree with grants to enable them to study for a Promotion (doctorate).
Indirect Forms of Financial Assistance
Students receive various indirect forms of financial assistance which include reduced health insurance rates, the fact that time spent studying is partially acknowledged by the pension insurance authorities, subsidised student ticket prices in local public transport, reduced dining prices in canteens and rents in publicly subsidised dormitories.
Students in higher education are also protected by statutory accident insurance against accidents occurring at an institution of higher education or on the way between their home and the institution. It is the Länder that are responsible for statutory accident insurance for students.
Private higher education
Study fees are charged at non-state-maintained higher education institutions in all Länder. As a rule, higher education institutions maintained by the church charge no or significantly lower tuition fees than the privately-maintained higher education institutions.