Academy and Studying in Germany

Private universities in Germany have also been affected by the economic crisis – though to a much less dramatic extent than in other countries, thanks to a low-risk investment strategy. In fact, in some cases the downturn is actually stimulating the range of academic courses on offer.

The Hanseatic University in Rostock has been forced to close, while the University of Witten/Herdecke (UWH) only escaped the same fate thanks to a philanthropic major investor. In the winter of 2008, such headlines sent shockwaves through the German education sector. However, the bad news had little to do with the global economic crisis. The start-up university in Rostock failed because demand in the region was analysed in an unprofessional manner. By the end, they had just three students left. The University of Witten/Herdecke on the other hand – founded in 1983 and the oldest private university in Germany – suffered from chronic underfunding right from the start. “No money was always something we had,” as founding president Konrad Schily is fond of saying. Bremen’s Jacobs University found itself in a similar situation for the first seven years of its existence, though since 2006 it has enjoyed a capital injection of 200 million euros, supplied by the coffee and chocolate manufacturer which now gives the institution its name.

Plenty of money, few students

As far as Germany’s higher education sector is concerned, such stories of success or misfortune are of very little “systemic relevance”. Only five percent of the two million students in Germany attend the country’s 120 private universities, some of which charge annual fees of over 10,000 euros. The remainder go to the mainly state-funded universities and technical colleges which, if at all, charge fees of less than 500 euros per semester. In these institutions, donations and project resources provided by industry are typically referred to as “third-party funds”.

When private universities were being established in Germany in the 1980s, powerful patrons were active both in the foreground and behind the scenes: this was the case in Witten/Herdecke, as well as at the Bucerius Law School in Hamburg and the WHU – Otto Beisheim School of Management in the town of Vallendar in Rhineland-Palatinate. The very fact that they are dependent on such sponsors means that the number of places on offer at these highly elitist universities is limited. With 1,200 students, Witten is the clear number one. They have plenty of money nonetheless: a “permanent sponsor”, for example, donates close to ten million euros a year to the Bucerius Law School, according to its director Markus Baumanns. Endowed with nearly 800 million euros, there is still enough to spend on other purposes, even in financially difficult years.

Creating networks, calculating conservatively

What is more, German private universities enjoy highly diverse sources of income. Interest earned on their assets is just as much a part of their annual revenue as income generated by events and projects, fees, donations and sponsoring. Their trust in the essential influx of donations often has its roots in a broad network of businesses. The WHU, for example, has around 150 companies within its circle of donors, sponsors, friends and supporters. Many are well-known names from the German stock exchange listings (Dax) whose generosity is tax-deductible.

Without exception, German universities shy away from financial risk and are as conservative as possible when investing private donations. Peter Anders, responsible for managing 1.9 billion euros on behalf of the Stifterverband für die deutsche Wissenschaft (the business community’s innovation agency for the German science system), therefore expects capital losses resulting from the current financial crash to total five percent at the most. By contrast, some universities in the USA lost 30 percent of their capital in 2008 alone – capital, however, which they had more than doubled in the previous ten years, not least by undertaking speculative investments.

Vocational training as business purpose

In the “second generation” of private universities that have been founded since the 1990s, it has been above all business associations, including banks, that have taken an active part. Far from pursuing any educational ideologies, these were and still are concerned with providing their staff with demand-based training, typically in the form of evening classes. One prime example is the FOM University of Applied Sciences, which has 11,000 students throughout Germany who either pay their fees themselves or have them paid by their employers.

Such universities can react flexibly to fluctuations in demand because many lecturers (as many as 40 percent at the FOM) are intentionally recruited from industry and only teach as a sideline to their “day jobs”. For these institutions, a financial crisis is, at worst, a solvable management problem. In a best case scenario, however, it can even have a stimulating effect on business, as has been the case at the FOM. “Precisely during an economic downturn, employees take greater initiative themselves,” notes FOM Vice-Chancellor Burghard Hermeier. “They know that education is the best protection against unemployment.”

Recently, profit-oriented educational enterprises have also discovered that setting up universities can be a good way of surviving the financial crisis. Among them are the schoolbook publishers Klett and Cornelsen, which each operate several universities of applied sciences nationwide. “Our target group of school students is shrinking,” is how company director Michael Klett explains their motivation. “When it comes to lifelong learning, however, the figures are fantastic in our distance-learning schools and universities.” One positive side effect of this is that the publishing houses themselves create a market for their own books and electronic learning aids. Even traditional providers of sub-academic vocational training such as the Bernd Blindow Group are now adding BA, MA and even doctoral degree courses to their range targeted at “educational climbers”.

In times of crisis, it would seem, setting up a private university here and there can help ensure a diverse range of commercial educational and teaching aid providers in Germany.