Tuition fees and academic (in)activity in higher education: How did students adjust to the abolition of tuition fees in Germany?

Five years after introducing tuition fees, the German state of North Rhine-Westphalia (NRW) abolished them in March 2011. Using student-level panel data, we assess the effects of this reform on academic activity and performance in two universities in NRW: a state university and a private university of applied sciences (UAS). We find that the increasing dropout rates at the state university do not necessarily point to lower ability or motivation, as an important share corresponds to ghost students. Thus, accounting for academic inactivity is essential to prevent the misreporting of dropout rates. Inactive students are attracted to in-kind student benefits or use the university as a bridge to their professional or academic careers. The social costs associated with such inactive students amount to 3.3% of public spending on higher education in NRW. Furthermore, we estimate causal effects solely on active students susceptible of a behavioral adjustment. We consider cohorts that enrolled with tuition fees and employ two-way fixed effects models that account for effect heterogeneity cohorts and study semesters. Students at the state university did not register for fewer exams but passed about 10% fewer credit points per semester after the reform, which is explained by a student effort effect. At the private UAS, students experienced a more substantial decrease in academic performance and were nine percentage points more likely to withdraw from a registered exam. Prospective graduates are the primary drivers of these effects at both institutions, explaining the increased time-to-completion. Consequently, the introduction of moderate tuition fees emerges as an effective policy instrument to encourage students to exert greater effort.