In Chile, the issue of financial aid and its influence on career choices is a multifaceted one, influenced by economic, social, and psychological factors. This becomes especially evident when comparing the free education system with options such as the State-Guaranteed Credit (Crédito con Aval del Estado or CAE), a government-backed loan program.
The free tuition policy, known as "gratuidad," was implemented in Chile in 2016 as part of a broader initiative to improve access to higher education for students from low-income households. However, the legal framework supporting this policy was solidified with the passing of Law No. 21.091 on Higher Education in 2018, which outlined the eligibility criteria and institutional requirements for participating in the free education system.
Under the law, free tuition is granted to students who come from households within the bottom 60% of the national income distribution, are enrolled in full-time undergraduate programs at accredited, non-profit institutions that participate in the gratuidad system, have no prior professional degree, and meet the academic progress requirements set by the institutions. This policy has effectively removed the direct financial burden of education, thus expanding access to higher education for many young people who previously saw university as an unaffordable option.
Despite the free tuition, other financial support options like loans (CAE and the Solidarity Fund) remain available. While loans make education accessible, they also come with the potential for debt, which can deter some students from applying for university and may influence others to pursue careers with more promising financial returns. This debt burden often leads students to prioritize fields with higher employability rates, as they feel the pressure to repay their loans. In contrast, students benefiting from free tuition are more inclined to choose fields based on personal passion rather than the economic prospects of their careers.
Free tuition has had a significant impact on fields like STEM, where enrollment in riskier majors with higher dropout rates has increased. The financial support provided by no-strings-attached grants has mitigated some of the risks associated with pursuing higher education, allowing students to explore academic disciplines they might have otherwise avoided due to financial constraints. For instance, students benefiting from free tuition are more likely to pursue careers in social or artistic fields without being overwhelmed by concerns about future earnings. On the other hand, those who rely on loans often focus on careers with high earning potential, as they need to secure jobs that will help them repay their debts.
The free tuition policy has also shifted the dynamics of university enrollment. Between 2015 and 2019, the percentage of students from the lowest six income deciles enrolling in institutions offering free tuition increased from 40% to 60%. This shift demonstrates how economic incentives have influenced vulnerable students to choose institutions that participate in the free tuition system. However, this has led to a decrease in socio-economic diversity within universities that offer free tuition. Students from the first six income deciles now represent 70% of enrollments in state universities, while they make up less than half of the enrollments in other institutions.
By providing free education, the policy has also made it easier for students, particularly those from lower-income backgrounds, to pursue careers based on their interests and passions without the pressure to prioritize financial returns. However, this has been accompanied by higher dropout rates for students who benefit from free tuition. Generally, students with free tuition tend to drop out at higher rates in their second year compared to those who finance their studies through loans. While this trend varies by field of study, students in fields such as social sciences and humanities tend to have lower dropout rates when receiving free tuition, while students in areas like agriculture and services are more likely to drop out when relying on loans.
Chile’s dropout rates remain a challenge, with approximately 25% of students leaving university after their first year. Technical careers in STEM fields often have a dropout rate of 30.6%, higher than that of professional programs. Loan-dependent students tend to make more pragmatic decisions about their career choices, focusing on fields with better financial returns in order to meet the demands of repaying their debts. Meanwhile, first-generation students, those whose parents did not attend university, face even greater challenges in staying on course. A study by the University of Chile showed that although free tuition improved access for these students, retention rates remained lower, particularly during the first semesters.
While free tuition has enabled more students to access higher education, the question remains whether it has done enough to improve graduation rates, particularly in demanding fields like STEM. The gap in academic preparation and resources continues to be a significant challenge. More comprehensive studies are needed to understand the long-term impact of free tuition on graduation rates, taking into account factors such as gender and socio-economic background.
In light of these challenges, the Chilean government has proposed replacing the State-Guaranteed Credit system with a new Public Financing for Higher Education (FES) system. This system aims to reorganize student debt, offering partial forgiveness for loans based on factors such as the debtor’s academic situation and payment status. It also seeks to modernize the way higher education is financed, eliminating the role of banking institutions in the process. However, the proposed system has faced criticism from experts, educational institutions, and analysts. Concerns revolve around its impact on university autonomy, potential reductions in university revenues, and the possibility that it could exacerbate inequalities in access to higher education. Many argue that by focusing on student demand rather than the needs of the institutions, the FES system undermines universities’ ability to set academic priorities and respond to the specific needs of their communities.
Moreover, the system’s financial sustainability has raised concerns. As public funding becomes tied to enrollment numbers and quantitative metrics like graduation rates, universities may face pressure to prioritize easily quantifiable outcomes over the broader goals of education. This shift may compromise the quality of education, particularly in less marketable fields like the humanities and social sciences, which are crucial for the country’s cultural and democratic development.
Although Chile invests heavily in higher education—spending 2.4% of its GDP, far above the OECD average of 1.5%—there are still significant challenges in the quality and accessibility of education, particularly in preschool and school education. Many believe that the focus should shift towards improving early education rather than further expanding financial support for higher education, which could address long-standing issues such as high dropout rates and low learning outcomes in primary and secondary education.
Ultimately, while Chile’s free tuition policy has expanded access to higher education, the country faces ongoing challenges in balancing access, quality, and financial sustainability. Moving forward, policymakers must find ways to ensure that all students, regardless of their socio-economic background, can access a high-quality education that will equip them for the future.