While public universities receive state funding for their activities, private higher education institutions have to finance themselves, leaving them at a disadvantage.

"Universities should not be treated differently according to their form of ownership," said Meelis Kitsing, rector of the Estonian Business School (EBS). "Two public universities receive an operating subsidy of somewhere between €40-50 million, but in the case of EBS the amount is zero. The second principle is efficiency. We can see that there is some debate about how best to finance higher education. For our part, we see very clearly that we can deliver (higher education) more efficiently, at lower cost, in the same amount of time and with the same quality as other (institutions)," said Kitsing.

Under the Higher Education Act, a private higher education institution can receive operating grants if it meets the strategic objectives of the state and if the labor market requires specialists with the qualifications it provides.

"In Estonia, according to the Higher Education Act, the state has a primary obligation to fund public and state universities of applied sciences, which in return are obliged to provide free Estonian-language higher education. Private higher education institutions have the right to charge students a fee for both English-language and Estonian-language teaching. The state does allocate funds to private higher education institutions, for example, when providing students with special needs-based grants," said Margus Haidak, head of the Higher Education and Vocational Education Policy Department of the Ministry of Education and Research.

Most private higher education institutions in Estonia receive funding from EU support measures, with EBS receiving €200 000 a year.

"At EBS, for example, we have been providing targeted support for doctoral studies for years, which means they have been able to create free doctoral positions.

We have allocated support to pay doctoral grants because, for many years, the number of PhD graduates in Estonia has been below target," said Haidak.

Mait Rungi, rector of the Mainor Business School in Tallinn, said that private higher education institutions were acting in the state's interest, but were not being sufficiently recognized.

"The state has taken the view, that perhaps there is more scope for private universities to apply for all other types of public funding, but this leads to another problem, that applications for money from these public funds will be treated as state aid," said Rungi.

As no decision has yet been taken to allocate additional funding to private higher education institutions, it appears that the Ministry of Education and Research has not accepted EBS's application.

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