Is higher education facing a temporary funding squeeze or a deeper structural problem? Rising costs, enrollment uncertainty and uneven public investment raise important questions.

Colleges and universities across the United States are facing some difficult financial decisions. From freezing hiring and cutting academic programs to delaying infrastructure investments, institutions are looking for ways to manage their expenses.

But here’s what’s interesting: public funding for higher education has actually increased in recent years. So why are so many universities still struggling financially?

According to the National Education Association’s State Funding Update, state appropriations for higher education reached $129 billion in FY2025, a 4% increase from the previous year. However, inflation brought that growth down to just 2%, while 17 states experienced inflation-adjusted funding declines. Even more concerning, 12 states had yet to recover their total inflation-adjusted funding to pre-pandemic levels.

The problem didn’t emerge overnight. Many public universities entered the pandemic without fully recovering their per-student funding from the 2008 financial crisis. Since then, rising operating costs, changing enrollment patterns and uncertainty surrounding federal research funding have added further complications. Even when state governments increase their investments, the additional funding may not be enough to keep pace with institutional expenses.

And universities cannot simply raise tuition every time their expenses increase. Students and families are already concerned about affordability, while some states impose limits on tuition increases. This leaves institutions with difficult choices about where to allocate resources and which investments they can afford to postpone.

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