Higher education systems globally face a funding crisis as models from the last half-century prove unsustainable. Rising participation, fiscal pressures, demographic shifts, and technological disruption have exposed weaknesses in systems designed for a different era. Policy-makers often respond with incremental fee and loan adjustments rather than addressing whether these institutions remain fit for purpose.
The limits of market solutions
Christopher Millward, a professor of practice in education policy at the University of Birmingham, argues that the transfer of costs from governments to students has fundamentally reshaped funding. England relies heavily on tuition fees supported by income-contingent loans. The logic seems reasonable during fiscal constraint, but the approach reveals contradictions. Students make decisions with imperfect information and uncertain returns, yet competition has encouraged institutions to invest in branding and amenities rather than educational quality. Loan systems have often shifted costs rather than resolved them, as governments continue to carry substantial exposure when debt is written off.
Moving beyond the English experience, Lorraine Dearden of University College London points out that persistent socio-economic disparities in participation are rooted in unequal school outcomes, not just access issues. Expanding participation requires investment in secondary education. While education should remain free at the point of access for disadvantaged students, system sustainability requires graduates to contribute through income-contingent repayments. This creates a tension between equity and fiscal responsibility.
NV Varghese, a distinguished visiting professor at the Indian Institute of Technology Bombay, places these debates in a longer historical context. Public funding expanded alongside enrolments because higher education was viewed as a public good supporting nation-building. However, globalisation and market reforms promoted a narrative of higher education as a private investment. Governments now encourage wider participation while reducing their financial commitment, creating mounting pressure for institutions, students, and families. Even universities seeking alternative revenue through international education, industry partnerships, and philanthropy encounter obstacles from governments reducing international admissions.
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Funding for universities is intertwined with wider discussions about taxes and how the state spends money. While authorities push colleges to admit more students, they at the same time try to keep public outlays low. This tension generates hidden expenses: rising student loans, growing budget gaps for institutions, postponed spending on facilities, and a widening gap in educational opportunity. Such results are often labeled as problems belonging to the institutions themselves, even though they stem from political decisions.
Redefining the purpose of education
Huw Morris of University College London argues that discussions should begin with purpose. Before determining how education is funded, policy-makers must decide what tertiary education systems are expected to achieve. Governments debate repayment thresholds and funding formulas without articulating a coherent vision. Is its primary purpose workforce preparation, economic competitiveness, social mobility, or civic development? The answer is usually all of these, yet funding frameworks rarely reflect this multiplicity of goals. Artificial intelligence illustrates the gap: governments emphasise lifelong learning, but most financing remains concentrated on young people undertaking an initial qualification.
The webinar’s concluding discussion highlighted that many governments focus on universities while the challenge lies across the broader tertiary system. During the 20th century, elite higher education served a small proportion of the population. Today, participation in tertiary education has become the norm. Universities, vocational institutions, technical colleges, and professional providers form an interconnected tertiary ecosystem. Yet public debate remains disproportionately focused on universities, particularly research-intensive institutions. This creates distortions: research universities attract a large share of public funding despite educating a minority of students, while institutions responsible for the largest numbers of learners often operate with fewer resources.
The political economy of underfunding
State bodies encourage colleges to admit larger numbers of learners, citing benefits for the economy, labor market needs and upward mobility. At the same time, they feel pressure to limit public spending, prompting a shift of costs toward students, the institutions, employers and families. This strategy lets governments tout expanded access while creating hidden burdens elsewhere: student indebtedness climbs, institutions face budget shortfalls, capital projects are postponed, staff workloads swell, and reliance on tuition from overseas students grows. Inequalities in education also become more pronounced. These effects are frequently portrayed as internal institutional issues, though they are the direct fallout of policy choices.
