A review of the funding status of higher education institutions in various countries and in Iran, along with a proposed model for financing universities in the country
Abstract
Funding is considered one of the most critical challenges for the growth and sustainability of higher education. The budgeting model and allocation mechanisms for universities serve as important tools for the government in guiding and governing the country’s higher education system. Currently, university budgets in Iran are determined and distributed based on a “per-student cost” model, whose main weaknesses are its institution-centered approach and lack of performance orientation. Although various funding methods have been proposed and widely studied, many traditional approaches fail to meet the contemporary needs of universities Funding is considered one of the most critical challenges for the growth and sustainability of higher education. The budgeting model and allocation mechanisms for universities serve as important tools for the government in guiding and governing the country’s higher education system. Currently, university budgets in Iran are determined and distributed based on a “per-student cost” model, whose main weaknesses are its institution-centered approach and lack of performance orientation. Although various funding methods have been proposed and widely studied, many traditional approaches fail to meet the contemporary needs of universities.
Current Status of Higher Education Funding
Higher education funding worldwide faces rising costs that exceed available public revenues. Leading countries, including those in Europe and the U.S., increasingly rely on market mechanisms, while some Muslim countries like Turkey and Malaysia use endowments (waqf). Analysis of 16 countries shows that a mixed funding approach—combining tuition fees, government scholarships, and student loans—is most effective, as no single method fully meets universities’ financial needs.
Status of Higher Education Funding in Iran
University funding in Iran is primarily based on per-student cost formulas, supplemented by political negotiation, performance-based allocations, and program-specific funding. The per-student cost includes education, research and technology, cultural and student services, and support. Funding is distributed through a combination of methods, with base allocations ensuring university sustainability, while institutional negotiation and organizational interactions influence additional resources.
Proposed University Funding Model in Iran
To improve higher education financing, Iran should:
- Guide universities toward international standards and global rankings.
- Promote globalization through international partnerships and foreign student enrollment.
- Support university branding for a competitive identity.
- Allocate special and priority-based budgets for innovation, technology transfer, teaching quality, and strategic policies.
- Implement performance-based budgeting with practical use of performance data.
This study was conducted at National Research Institute for Science Policy by Ehsan EhteshamNejad in 2024.
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