There were education systems during the Hindu-Buddhist civilization era, and they were called the karsyan, which is actually a place of hermitage. The meaning of education back in those days was meant to bring a student closer to god.
The Islamic state that grew into Indonesia removed a lot of Hindu-Buddhist tradition and replaced it with Islamic traditions. During this time, Islamic boarding schools became more and more common.
It was the Dutch that first introduced elementary education in Indonesia, though at the time it was only meant for European people in Indonesia and other Europeans that lived or visited there.
In 1870, the Dutch Ethical Policy was created. The aim of this was to allow native Indonesian people to get an education at the schools that the Dutch people had set up. The idea and policy was created by Conrad Theodor van Deventer. The idea was the founding principle that set the course for modern elementary schools in Indonesia.
Formal education soon followed for Indonesian people, and that too was introduced by the Dutch in the country, though they only offered an education to privileged children of Indonesian native people. The structure of those schools was the same (almost) as it is today. There is now a structure that does not separate the Dutch from Indonesian natives as much, but there is still a lot on segregation. The structure involves:
HBS Pre-University (Hogere Burger School)
AMS High School or College (Algeme(e)ne Middelbare School)
MULO Middle School (Meer Uitgebreid Lager Onderwijs)
HIS Primary School for Natives (Hollandsch-Inlandsche School)
ELS Primary School for Europeans(Europeesche Lagere School)
There are quite a few Indonesian people that have set up Indonesian-only schools because they are unhappy about the schools that teach only native Indonesian people. Between the years of 1912 and 1922 there were more Indonesian-only schools set up than there were mixed or European-only schools.
On the island of Java, the Dutch colonial government established Universities that are just for native Indonesian students. It was only in the year 1930s that the Dutch started to introduce limited education that served almost all of Indonesia.
In 1973, there was a lot of progress made towards installing Universities, which seemed important because there was still a rate of 20% of children that were illiterate. The push for Universities was made ever stronger by the fact that new primary schools were being set up using oil money made by the country.
By the late 1980s, there was the repair or construction of almost 40,000 primary schools, which helped to improve literacy rates across the country.
The education system has grown very slowly in Indonesia, but is not doing too bad at the moment as the adult literacy rate is at around 90.4%. The country still has a way to go, as a report in 2009 showed that there are 2% of children between the ages of 15 and 24 that still cannot read. That is not a good figure, but is also not a terrible one when you consider that the country has had a lot of trouble finding funding for schools.