The Headlines
Higher Education’s Financial Landscape: Who Pays the Price?
How government funding reductions and limits on international students are shifting the financial burden within higher education globally.
By Niamh Ollerton
Institutions in the US also have some big decisions to make, with many still stunned from the fiscal challenges of 2024. Many were apprehensive about Trump’s second administration and what it would mean for universities - and the answer, in part, is cuts.
Governments need to be careful not to outprice international students with unattainable standards in the future, or risk positioning themselves as a less accessible option, hitting their universities harder over time.
Let’s address the elephant in the room: the global higher education and research industry is suffering.
Higher education institutions faced many problems in 2024, and 2025 is already offering its own set of challenges, including budget cuts, funding freezes and caps on international student visas.
What lies ahead for the higher education landscape? The answers are complicated.
The global higher education market was estimated at US$829 billion in 2024, according to market research firm Precedence Research. The market size is predicted to increase from US$929 billion in 2025 to approximately US$2,558 billion by 2034.
But such predictions feel like a paradox when we consider the market’s estimated growth and the widespread budget cuts and layoffs happening at universities around the world. While demand for higher education is increasing in many parts of the world, several factors contribute to these financial pressures on universities, making it difficult for them to thrive despite the growth.
Government budget cuts
In their 2024 plan, the Dutch government mentioned the importance of innovation 85 times - only to cut the budget for higher education and research by €1 billion (US$1.09 billion) a year later, reducing it to €500 million per year across higher education and research.
In the wake of these drastic budget cuts and financial restrictions, multiple Dutch universities have announced reorganisations. The University of Twente, Vrije Universiteit Amsterdam, University College Roosevelt and the Open University of the Netherlands are among the institutions that have warned redundancies could be on the horizon in the wake of these challenges.
At the University of Twente, 63 employees from the Faculty of Science and Technology will be directly affected by the planned reorganisation, with 46 threatened with redundancy. Eight research groups will also be completely disbanded.
About 65 full-time employees at the Open University are likely to be laid off, with approximately 20 people at risk of redundancy at University College Roosevelt.
Institutions in the US also have some big decisions to make, with many still stunned from the fiscal challenges of 2024. Many were apprehensive about Trump’s second administration and what it would mean for universities - and the answer, in part, is cuts.
With January’s federal cuts, bleak financial projections and yawning budget gaps at some campuses, administrators had no choice but to cut jobs, academic programmes and athletics options to plug holes and stabilise their finances.
At the University of New Orleans, after consolidating five colleges into two in December, 30 employees were laid off in January as the university chipped away at a $10 million budget deficit. The university also announced furloughs for full-time, non-tenured employees, which will affect nearly 300 workers.
Anticipated budget cuts also drove layoffs at California State University’s Dominguez Hills campus in Southern California - with the university letting 32 employees go.
The 23 institutions in the CSU system are bracing for state budget cuts of nearly US$400 million, meaning other institutions across California may likely introduce similar cost-cutting measures due to limited funding from anticipated decreases in state appropriations.
In Canada, higher education financial problems continue to spread, with some of the country’s top institutions announcing multimillion-dollar deficits and job cuts. On top of budget cuts already seen at Queen’s University, low enrolment and financial pressures at York University have seen the temporary suspension of new admissions to 18 courses.
Increases in costs and inflation are contributing greatly to the financial challenges at Canadian HEIs, with regional governments not providing increases in grant funding to match it. Drastic cuts to international student enrolments have not helped either.
McGill University, like Queen’s, is a member of the U15 leading research-intensive institutions, with the university recently revealing it will cut C$45 million (US$31.3 million) from its 2025-26 budget to eliminate operating deficits, blaming Quebec government measures.
Elizabeth Buckner, Associate Professor of Higher Education at the Ontario Institute for Studies in Education (OISE) at UofT, says Ontario-specific policies that cut domestic student tuition have exacerbated issues at York and Queen’s. “This has made the financial realities facing Ontario universities extremely difficult, given they are facing inflation as well and their cost structure is set.”
International student crackdown
International students play a significant role in the functioning of universities and their importance goes beyond enrolment numbers. However, governments and universities alike are increasingly scrutinising international student policies, leading to tighter regulations on permits and funding.
In 2024, Canada introduced a two-year cap on study permits, reducing the number by 35 percent, which may lead to fewer international students. By 2025, the number of study permits will be further reduced by 10 percent, with a maximum of 437,000 permits - caps said to help alleviate pressure on housing, resources and infrastructure while ensuring sustainable development.
However, governments aren’t just setting regulations on the number of international students they will accept - they are also setting financial solvency standards too.
As of January 1, 2024, the Guaranteed Investment Certificate (GIC) requirement for international students applying for a Canadian study permit increased from CA$10,000 to CA$20,635, reflecting the rising cost of living in Canada.
Similarly in the UK in 2024, the UK Home Office increased the financial savings required of international students for the first time since 2020, meaning international students coming to the UK must provide evidence that they have sufficient savings to support themselves “for each month of their course (up to nine months)”.
Under the new rules, international students in London will have to show evidence of having £1,483 (US$1,915) per month, whereas students planning to study outside of London will need £1,136 (US$1,467) per month.
The UK and Canada are not alone, Australia and New Zealand, as well as several other countries require international students to demonstrate varying degrees of proof that they have sufficient funds to cover living costs when applying for student visas.
Countries should take into consideration how much they rely on international enrolment - with international tuition fees in the UK alone ranging from £10,000 to £38,000 (US$13,000 - $49,000) per year. Governments need to be careful not to outprice international students with unattainable standards in the future, or risk positioning themselves as a less accessible option, hitting their universities harder over time.
Financial challenges within the industry
The global higher education industry is facing significant financial challenges, driven by a variety of factors that differ by region but share common themes.
Reduced government funding, rising costs of education, dependency on tuition fees, declining enrolment, global competition and changing student demographics, and the cost of research and innovation are a number of reasons why HEIs are facing financial strain.
In Nepal, financial constraints significantly impact the quality of higher education, with only about 3.5 percent of Nepal’s GDP spent on education, and a small fraction allocated to higher education. Many institutions are left under-resourced and unable to provide quality education.
This chronic underfunding affects the availability of modern teaching materials, research facilities and even the maintenance of existing infrastructure. As a result, students often feel their academic and professional development is not supported, with approximately 10-12 percent of Nepalese students pursuing education abroad - a relatively high proportion compared to many other countries, driven by limited opportunities for advanced education.
In Australia, university finances have deteriorated over the past decade, largely due to restrictive government policies and external pressures - with major reforms currently on the table.
Sweeping changes have been proposed by the Australian Universities Accord, from establishing a new national governance body, the Australian Tertiary Education Commission, to reshaping funding for both domestic and international students, these aim to align higher education with vocational education and national research priorities.
However, government caps on international student numbers will likely limit universities’ financial positions further, making it harder for them to fund campus improvements and support research programmes that rely on the funding.
Increased financial pressures on the higher education sector are likely to constrain growth.
An independent analysis from the Office for Students (OfS) cautioned universities against being too optimistic about future student growth. Although the study was held in the UK, the findings ring true for countries around the world.
The analysis highlighted five key risks affecting the sector. There is continuing decline in the real-terms value of income from UK graduates, combined with inflationary and economic pressures on operating costs.
Applications - both domestic and international - are dwindling across numerous countries including Japan, South Korea, Germany, Italy, Spain, the US, the UK, Australia and France - and HEIs are starting to struggle with the financial shortfall.
Many higher education financial models became too reliant on fees from international students, and now, with economic and political crises spilling over into HEIs, what does the future hold for higher education institutions? Only time will tell.