Private higher education in Germany is growing despite demographic challenges. This article examines the sector’s expansion, which is strongly driven by digitalization. Private institutions actively implement online education and use artificial intelligence, leveraging technology to improve efficiency and reduce costs of provision. The importance of universities of applied sciences focused on career-oriented programs is growing, too. Germany’s predominantly public higher education landscape is being reshaped in the context of dramatic technological change.

Describing the market of private higher education in Germany in 2022, Barbara Kehm wrote the following in IHE #109: “The majority of private institutions are considered too small, too specialized, and often too mediocre to merit much public attention. Thus, the sector does not really present a competition or a threat to the public sector.” While we agree that the private sector is not directly competing with the public sector of the higher education system, one can observe that the landscape is changing. Private higher education is growing and becoming an important part of the higher education system. How can this happen in a predominantly public system in the context of a declining number of school graduates? We try to answer this question below.

Growth of PHE

Europe’s population is one of the oldest in the world and is aging further. This trend is also visible in Germany. The current number of young people in Germany is at a historic low. Since the first census in 1950, the proportion of 15–24-year-olds has never been as low as it is now. For comparison: in 1984, young people represented 16.7 percent of the population of West Germany; by 2023, the share of young people in a united Germany had dropped to 10 percent.

One might expect to see an impact on higher education enrollment. However, there was no decline in enrollment in higher education institutions (HEIs) until very recently (total enrollment peaked in 2020 at 2.94 million and declined slightly to 2.87 million in 2024). What is interesting is an analysis of where this decline actually occurred. Between 2019 and 2024, enrollment in public HEIs declined from 2.59 million to 2.46 million, whereas private enrollment grew from 246,000 to 372,000. Private higher education (PHE), which only had 39,000 students in 2004, has been demonstrating steady growth. Today, 13 percent of all tertiary students in Germany attend private HEIs (compared to 8.5 percent in 2015). What is remarkable is that PHE has grown even in the context of negative demographic trends. Thus, private higher education is not only increasing its share of the pie but is also making the pie bigger.

Some private HEIs are growing into mega-universities: the largest university of applied sciences (UAS) in Germany is now a private institution (IU Hochschule, with over 130,000 students), followed by FOM Hochschule, another private UAS with over 50,000 students. Hochschulkompass.de, the official German online platform providing information about universities and study programs in the country, reports that as of 2024, there were 275 public and 110 private HEIs in Germany.

The private higher education sector in Germany has a relatively short history, as public institutions dominated the country’s higher education system until the establishment of the first officially recognized private university, Witten/Herdecke University, in 1983. To understand this history, one has to remember that the German higher education system comprises three main types of institutions, categorized by their focus and educational approaches: traditional universities (Universitäten), universities of applied sciences (Fachhochschulen), and colleges of arts and music (Kunst- und Musikhochschulen). Universities are also sometimes referred to as “research universities” or “full universities.” During the last decades, the importance of public UASs in German higher education has been growing. Many of them now offer graduate programs. The same is true about private UASs. Most private HEIs today are actually UASs (Hochschulkompass.de reports that there are 83 private UASs and 21 private universities).

Compared to public universities, private universities’ share in the fields of economics, law, and social sciences is very large (69 percent compared to 34 percent at public HEIs in terms of enrollment numbers), whereas natural sciences (13 percent versus 41 percent, respectively) and humanities (0.7 percent versus 13 percent, respectively) are much less represented.

Germany has a very small sector of elite research-intensive private HEIs, comprising three “comprehensive” research universities (Constructor University, Zeppelin University, and Witten/Herdecke University) and a small number of specialized HEIs. Even private “full” universities, with very few exceptions, are not competing with the public “full” universities in terms of research (publications and grants). The majority of private institutions could be described as primarily “career-oriented.”

Most private universities operate as nonprofit organizations. At the same time, the importance of for-profit private HEIs and their students is growing (for example, IU Hochschule, with over 130,000 students, is for-profit). This fact looks even more surprising in the context of a strong social belief in free higher education in German society.

New Entrants

So, who are the students enrolled in private HEIs? One of the answers is international students. Most English-language undergraduate programs in Germany are offered by private HEIs (to compare: private HEIs offer 31 programs taught in English, while public HEIs offer 25 such programs).

However, a significant share of students comes from the domestic population. This means that new groups are entering higher education. One such group is first-generation students whose parents did not have a chance to get tertiary education. This expanding group faces unique challenges in adapting to university life, as they are often less academically prepared than those entering more traditional public HEIs in Germany. As the size of the potential student pool declines and tertiary education expands due to continuing massification (the share of people with tertiary education among those aged 25–64 grew from 28.6 percent in 2017 to 33.3 percent in 2023, according to OECD data), universities increasingly recruit from less academically prepared groups to maintain enrollment numbers.

Digitalization as a Tool to Increase Efficiency

With a student body entering with lower academic preparedness and facing various challenges in adjusting to university life, private universities are facing a serious challenge: The “marginal cost” of educating students is rising, driving up the costs for higher education institutions and potentially jeopardizing the quality of higher education provision.

The main answer to this challenge is online delivery and digitalization. Private universities are significantly more active in offering online programs and are using digital technologies to improve quality, increase efficiency, and reduce costs.

In total, private HEIs offer 770 online programs, while public HEIs offer only 288. Of all online programs, 56 are taught in English and 1001 in German. In the public sector, 105 online programs are offered by universities and 179 by UASs. In the private sector, almost all online programs (767 out of 770) are offered by UASs.

Analysis of the universities’ websites and news publications also confirms that the majority of private HEIs are interested in driving down the costs of teaching and utilizing economies of scale provided by new technologies (online learning, digital resources, artificial intelligence (AI)).

The example of IU Hochschule, the largest German university of applied sciences, is illustrative: The institution has demonstrated rapid growth in enrollment (from just 300 students in 2012 to over 130,000 students in 2024) by actively implementing AI and online learning. IU Hochschule claims, for instance, that Syntea, the HEI’s AI-driven teaching assistant, offers personalized interaction, enabling students to ask study-related questions anytime and receive immediate feedback.

To conclude, we can say that, in Germany, private higher education not only absorbs the demand that exists due to massification, but also opens new opportunities for students and does so while reducing the average cost of education by actively engaging with distance learning and AI.

Isak Frumin is professor and head of the Observatory of Higher Education Innovations at Constructor University (formerly Jacobs University Bremen), Germany. E-mail: [email protected].

Alexander Kalgin is senior analyst at Constructor University Bremen, Germany. E-mail: [email protected].