Tuition fees and academic (in)activity

• Accounting for academic inactivity is crucial for accurately computing dropout rates and evaluating interventions and policies in higher education. • Ghost students are attracted to the high enrollment incentives, incurring social costs and skewing data on student success. • Due to the tuition fee abolition, active students reduced their academic performance, measured in credit points, by 12 %. • After the reform, individuals were 10 pp. more likely to be ghost students and 5 pp. less likely to graduate. • Introducing moderate tuition fees is an effective method to encourage students to exert more effort and increase efficiency in public spending. We examine the effects of abolishing moderate tuition fees (EUR 500 per semester) in Germany on higher education outcomes. Using administrative panel data from a state university, we find that tuition-free students reduced their academic effort: active students postponed graduation, while low-activity students became more inactive by withdrawing from registered exams. Leveraging detailed student-level data, we analyze the ghost student phenomenon, in which enrolled students show no academic activity. This pattern emerges from strong enrollment incentives combined with a lack of performance standards. After the reform, the share of ghost students increased, reducing the efficiency of public spending on higher education.