In the Finance Committee: CRUCH presents proposals to improve the FES project and ensure university sustainability

At the Finance Committee of the Chamber of Deputies, the executive vice president of the Council of Rectors of Chilean Universities (CRUCH), Emilio Rodríguez, stated that the Higher Education Fund (FES) represents progress, but requires “significant improvements” to guarantee the financial sustainability of universities and respond to the needs of the system as a whole. CRUCH puts forward four key proposals.

Regarding the CAE, Rodríguez indicated that for the Council its continuation "is not viable in the medium or long term.".

Executive Vice President Emilio Rodríguez presented to the Finance Committee of the Chamber of Deputies the analysis, reflections and proposals prepared in recent months by the Council of Rectors of Chilean Universities (CRUCH), regarding the need to end the State Guaranteed Credit (CAE) and the improvements required by the bill that creates the new Financing System for Higher Education (FES).

In the session this Tuesday, July 1st in Valparaíso, Rector Rodríguez (University of Tarapacá) began by stating that the presentation did not respond to the particular interests of the institutions, but rather "it is a position from the perspective of the higher education system, that is, assuming the advisory role that CRUCH has.".

Regarding the CAE (Student Loan System), the Council stated that "its continuation is not viable. It is not viable in the medium or long term." They argued that it has structural deficiencies, such as the onerous conditions for students, the low debt recovery rate, the lack of effective regulation and oversight, and the high public spending on loan portfolio purchases and guarantees.  

According to 2024 data, there is an extremely high delinquency rate, corresponding to 841% of students who have dropped out of their programs and approximately 601% of those who have graduated. In this context, it was explained that the State has to cover and pay the guarantees for this loan each year, and this amount has been steadily increasing. In 2014, it was 8.117 billion pesos, but in 2024 it reached 357.4 billion pesos. 

“How much longer can the State continue to finance at this rate?” the rector reflected, adding that “it seems the State must impose restrictions. That’s called budget constraints, it’s called budgetary responsibility, and we believe the CAE (Student Loan System) does not guarantee that today.” Ultimately, the CRUCH (Council of Rectors of Chilean Universities) maintains that the CAE is an unsustainable public policy and must be replaced. 

Regarding the new bill under discussion, Rodríguez valued the political will to move towards a fairer and more efficient system, but was emphatic in stating that the design of the FES still presents elements that could compromise the financial stability of higher education institutions, especially those with a public vocation and complex functions.

FES: main CRUCH proposals 

While CRUCH acknowledges that the bill “corrects the distortions of the previous system, improves administrative efficiency, and generates a more efficient debt forgiveness plan through the General Treasury of the Republic,” the bill “still requires significant improvements (…) These improvements are essential for the system to truly be sustainable,” warned the executive vice president.

The CRUCH also values the fact that the new bill introduces transparency regulations and limits on tuition funded with public resources at private institutions, demanding quality and accountability. Furthermore, “it eliminates Article 108 (of Law 21.091), which is also important because it represents a loss for the entire system and alleviates the financial burden on students. In addition, something that is important for the CRUCH is that it allows the use of surpluses from the Solidarity Credit Fund (for institutional purposes defined by law, strengthening university management),” Rodríguez pointed out.

Regarding the necessary conditions to move forward with the FES, CRUCH presented four fundamental proposals for improvement to guarantee the financial sustainability of universities and the long-term viability of the system:    

1. Inclusion of co-payment for deciles 7 to 9. According to CRUCH's analysis, eliminating co-payments in these income brackets poses a significant risk to institutional funding, given that these contributions represent a substantial portion of many universities' revenue. This measure could directly impact the viability of the complex functions universities perform (research, postgraduate studies, community engagement), without adequate compensation in the new system. Therefore, it is proposed to reinstate co-payments for income deciles 7 through 9, using a progressive scheme based on family income level, similar to that established by Law 21.091. This formula does not entail an increase in public spending and maintains current income levels for universities offering free tuition. It is also emphasized that any reform along these lines must be implemented gradually, allowing for monitoring of its effects and safeguarding institutional sustainability.
2. Guarantee of timely transfers. One of the risks most frequently cited by universities is the uncertainty surrounding the timeliness and continuity of state funding. In a demand-based system, timely payments are essential for the institutions' operations. The project must incorporate clear mechanisms to ensure the delivery of resources within defined timeframes and without interruption, enabling universities to engage in responsible financial planning and safeguarding their capacity to perform essential functions.
3. Setting a cap on future contributions. The project, in its current form, does not include mechanisms to limit the total contributions that FES beneficiaries must make. This could result in excessive payments for high-income individuals, discouraging participation in the system. It is proposed to define a reasonable contribution cap, for example, by linking the maximum contribution to the taxable income threshold or the actual cost of training. This measure ensures the long-term viability of the system and prevents segregation.
4. Possibility of partial financing via FES. The project does not include the option for students to access partial financing, which restricts the system's flexibility. Many families strive to avoid placing their children in full debt, and in contexts where private scholarships or family support exist, imposing mandatory full financing could be counterproductive. It is proposed that students be allowed to define the percentage of FES coverage they require, enabling adaptation to diverse contexts without affecting the financial stability of institutions. This would incentivize participation in the program and maintain shared responsibility for financing.

Additionally, the vice president of CRUCH emphasized that “this dialogue cannot end without raising the need for a comprehensive financing system, because the FES is actually a financing system for teaching, but it doesn't include research, postgraduate studies, or other essential elements that make a difference in the development of countries, such as science, knowledge, technology, and innovation.”. 

In this regard, the Council believes it is essential to establish a systemic framework that allows for evaluating the impact of different financing mechanisms based on the quality, structure, and mission of the institutions. Therefore, it proposes moving towards a stable, differentiated, and coherent institutional financing architecture that addresses the country's challenges, complements student financing, and enables long-term strategic planning.

In closing, Rodríguez argued that “financing cannot continue to depend solely on demand. We need a state policy that guarantees the sustainability of the system as a whole.”.

Text and photograph: CRUCH Communications