Over the last two decades, Latin America has been one of the fastest growing markets for higher education. In the below report, Lumos 2021 spring fellow Yesenia Arteta Bonett (Chicago Booth MBA ’22), a native of Colombia, breaks down options to increase affordability and access to quality higher education. She reviews financing tools — from deferred tuition to income share agreements — that higher education companies use to reach students in the region looking for a transformative education experience.
We believe edtech in LatAm is a case study on the shifting and growing demand for education and how the investment ecosystem can enable new and better options.
See Yesenia’s report here.
Keep reading for more context and details.
In 2017, the World Bank released a report on the potential for Higher Education in LatAm and the Caribbean, titled At a Crossroads: Higher Education in Latin America and the Caribbean.
“Higher Education is key to boosting growth and reducing poverty and inequality,” said World Bank Vice President for Latin America and the Caribbean Jorge Familiar. “To ensure equity of opportunities, the region has to enhance quality of education and provide students with better information on programs, adequate incentives and financing options, and connections to the labor market. Better regulation of higher education institutions is also needed to improve accountability for the services they provide.”
The report noted the rate of students in Latin America and the Caribbean who graduate from higher education programs more than doubled between 2000 and 2013, going from 21% to 43%. Enabling the growth of the number of graduates was the growth in higher education institutions (HEI) in the same period — about 25% of the HEIs that exist today in Latin America were opened over 2000-2013, and a majority were in the private sector. As such, the market share of private HEIs in LatAm went up from 43% in the early 2000s to 50% in 2013.
Despite the rising demand and opportunity for higher education, dropout rates remain a major challenge. The report notes that only half of the students entering higher education receive their degree by the time they are 25-29 years old. Interestingly, even higher education dropouts command a relatively large average earning premium of 35% relative to high school graduates.
Reasons for such a high dropout rate in the region include inability to keep up with academic rigor (limited academic preparedness from high school) and lack of financial means for low-income students. A major policy recommendation set forth by the World Bank was to design “better funding systems in order to provide incentives for institutions and students to achieve good results, and remove financial barriers to higher education access through instruments such as scholarships, grants for living expenses, and student loans.”
Fast forward to 2021 and the global pandemic has created negative consequences for higher education in LatAm. According to the Inter-American Development Bank, millions of students are leaving their universities. Amid lockdowns, youth unemployment has spiked, and many can no longer afford to pay tuition. Affordability has become critical in an outcomes-focused education to employment labor market. Exploring affordable alternative higher education offerings has never been more relevant.
