14th Market Economy Colloquium: Why Tuition Deregulation Is Needed and the Policy Challenges

14th Market Economy Colloquium

Date and Time: April 17, 2026, 11:00 a.m.

Venue: Pureun Hall

Topic: The Need to Ease Tuition Regulation and Related Policy Tasks

Presenter: Ho-jun Wang, Research Fellow, Center for Free Enterprise (CFE)

Discussants: Kim Gi-man, Secretary General, Citizens Forum for Good Regulation; Jae-wook Ahn, Professor Emeritus, Kyung Hee University; Sung-no Choi, President, Center for Free Enterprise (CFE); Jeong Yun-seok, Professor, Myongji College; Gwang yong Go, Policy Director, Center for Free Enterprise (CFE); and 8 others

The Need to Ease Tuition Regulation and Related Policy Tasks

Ho-jun Wang, Research Fellow, Center for Free Enterprise (CFE)

Background and Problem Awareness in the Tuition Regulation Debate

Over the past decade or so, the core direction of higher education policy in Korea has been “tuition freezes” and “suppression of increases.” Although university operating costs have continued to rise due to inflation, higher labor costs, and expanded educational infrastructure, tuition has in practice been tightly controlled for a prolonged period through legal and administrative regulation. While this policy has had the short-term effect of reducing the burden on students, it is increasingly necessary to reconsider it because, in the long term, it has distorted the overall financial structure of universities.

In particular, the tuition issue is not simply a matter of the individual cost burden borne by students. Tuition is a central pillar of university finance and an important variable in determining the quality of educational services. Moreover, tuition is directly tied to the foundation that allows universities to design their finances autonomously and maintain and improve educational quality. Nevertheless, the current system operates mainly by suppressing tuition increases, and this functions as a structural factor constraining the autonomy of the higher education system as a whole.

At the heart of the problem is the fact that tuition has become fixed as a “policy price” managed by the government. In a market economy, prices should be formed by reflecting various factors such as cost structures and inflation, but under the current system, this pricing function is not working properly.

This situation is likely to lead not only to financial problems for universities but also to broader structural inefficiencies across higher education. Therefore, the issue of tuition regulation needs to be approached from the perspective of ensuring the sustainability and competitiveness of higher education.

The Current Tuition Regulation Structure and How It Operates

Tuition regulation in Korea operates through a structure that combines legal regulation with conditions attached to financial support. On the surface, this structure appears to recognize university autonomy, but in reality, it works by heavily constraining the entire tuition-setting process.

First, as a matter of legal regulation, the Higher Education Act limits the rate of tuition increases to within 1.2 times the average consumer price inflation rate over the previous three years. This functions as a legal ceiling preventing tuition from rising beyond a certain range, and if a university violates it, the Ministry of Education may impose administrative and financial sanctions.

In addition, the National Scholarship Program and various university financial support projects effectively make tuition freezes or reductions a condition of participation, meaning that universities that raise tuition may be excluded from such support. This acts as an even stronger incentive than legal regulation and substantially limits university decision-making.

As a result, universities are placed in a situation where it is difficult to choose tuition increases even within the legally permitted range. Consequently, tuition functions not as a price reflecting a university’s cost structure or demand for educational services, but as an element managed according to government policy direction.

This structure significantly constrains universities in designing their own financial strategies and making investment decisions to improve educational quality. In other words, the current tuition system is closer to a structure of policy control than to one of autonomous price-setting.

Structural Problems Caused by Long-Term Regulation

As this kind of tuition regulation has continued over a long period, various structural problems have accumulated throughout the higher education system. These problems go beyond mere financial difficulties and affect overall educational quality and university competitiveness.

First, the financial autonomy of universities has weakened while dependence on the government has increased. Tuition revenue has remained stagnant for a long period, while government subsidies have increased significantly, shifting university finances from a structure centered on self-generated revenue to one centered on government support. This means that the share of resources universities can use autonomously is shrinking, while dependence on the policy environment is growing.

Second, there is a growing possibility that financial pressure will lead to a decline in educational quality. When tuition fails to adequately reflect inflation and rising costs, universities have little choice but to adopt cost-cutting strategies to maintain financial balance. As a result, decisions that weaken long-term competitiveness—such as reducing research funding, cutting educational investment, and delaying facility improvements—may accumulate.

Third, there is a structural limit to improving student welfare as much as expected. Tuition regulation nominally has the effect of restraining the burden on students, but as universities’ financial capacity declines, the actual level of welfare—such as scholarships, educational services, and student support programs—may stagnate or even decrease.

In this way, tuition regulation may produce the short-term effect of easing burdens, but in the long term it creates a structure that negatively affects educational quality, university competitiveness, and student welfare overall.

Limits of the Current Policy Approach and Problem Recognition

The current tuition policy is based on the simplistic policy frame that “tuition suppression = student support.” However, this approach fails to fully reflect the financial structure and operating mechanisms of higher education and is, in part, focused on short-term political goals.

Tuition is not merely a cost item; it is a key variable forming the financial foundation of universities and is directly linked to educational quality. If it is controlled uniformly, universities lose flexibility in financial management, making long-term investment and innovation difficult.

In particular, in a situation where the structural change of a declining school-age population is underway, controlling tuition as well inevitably makes the financial foundation of universities even more fragile. If tuition revenue declines as student numbers fall while tuition adjustments remain restricted, universities have little choice but to rely on restructuring or cost reduction.

This situation is highly likely to lead ultimately to declining educational quality and weakened university competitiveness. Therefore, tuition policy requires a structural approach that takes into account the sustainability of the higher education system as a whole.

Policy Direction: Redesigning the System Based on Autonomy and Responsibility

Easing tuition regulation is not simply an argument for raising tuition; it is a matter of institutional reform aimed at restoring a structure in which universities can set prices autonomously and be evaluated based on the results.

First, the structure linking the National Scholarship Program to tuition regulation should be abolished, and the scholarship system should be redesigned to focus on student support rather than serving as a means of controlling universities.

In addition, the ceiling on tuition increase rates should be abolished, or at the very least, the system should be improved so that universities can make autonomous adjustments according to their cost structures and strategies. This would allow tuition to function as a price that reflects the quality of educational services and the cost structure.

Furthermore, tuition autonomy should not be treated as a single policy in isolation, but should be combined with broader liberalization across higher education. It is important to expand autonomy in various areas, including academic administration, personnel systems, and financial management, while establishing corresponding systems of responsibility and evaluation.

Ultimately, what matters is not the tuition level itself, but the creation of an institutional environment in which universities can strengthen their competitiveness on the basis of autonomy and responsibility. Future policy discussion should begin by shifting the tuition issue from an object of “suppression” to a matter of “institutional design.”

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Original title: 제14회: 등록금 규제 완화 필요성과 정책과제

Author: Market Economy Colloquium

Date: 2026-04-17

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=collo&pn=1&idx=28814