Financial uncertainty clouds higher education's future
Key Highlights
- States are facing budget shortfalls that may lead to higher tuition and staff layoffs.
- Federal funding for research agencies is expected to decrease and affect university research projects.
- Declining birth rates and international student visa restrictions could further reduce college enrollment in the coming years.
As states face budget difficulties, many of them are unable to help universities with their financial challenges and in some cases are exacerbating universities’ struggles by cutting funds.
With tax revenue stagnating, spending pressures rising, and federal uncertainty looming, many states are either planning or already carrying out higher education funding cuts, an analysis by The Pew Charitable Trusts says.
write that in 2025 legislative sessions, lawmakers in at least 15 states proposed or enacted broad or targeted cuts to public university and college funding. Even in states that avoided outright cuts, flat funding or small increases effectively translated into reductions for many institutions after accounting for inflation and rising operating expenses.
In Virginia, Governor Glenn Youngkin paused a total of $600 million in funding requests for 10 higher education infrastructure projects. In Washington, the state legislature dealt a 1.5% cut to all public four-year higher education institutions as part of an effort to close the state’s $16 billion budget shortfall over the next four years. And in South Dakota, lawmakers cut and repair to help balance the budget.
The effects of these budget decisions are likely to intensify as the impact of cuts becomes clear. Many public university systems have resorted to higher tuition, hiring freezes and layoffs.
Higher education’s other funding streams—federal funding and tuition revenue—are also under pressure. Colleges and universities will have to work with legislatures to figure out how to address these challenges.
The grants and contracts universities receive from the federal government could be reduced if proposed funding cuts become law. President Donald Trump’s preliminary fiscal 2026 budget includes significant cuts to agencies that are some of the largest funders of university research, including a nearly $18 billion reduction in funding to the National Institutes of Health and a $5.1 billion reduction for the National Science Foundation.
Higher education officials at public universities are also worried about the nation’s declining fertility rates. Undergraduate enrollment in public and private universities peaked in 2010, then declined through the 2022-23 school year. Covid-19 created further disruptions for colleges, leading to decreases in both enrollment and student retention. It wasn’t until the 2024-25 school year that total postsecondary enrollment (undergraduate and graduate) surpassed pre-pandemic numbers.
The Western Interstate Commission for Higher Education projects a steady decline in college-age students starting in 2026 as babies born in 2008 graduate from high school. But despite the downward pressures, the National Center for Education Statistics predicts that enrollment levels will remain steady through at least 2031.
Higher education enrollment rates are also driven by factors such as whether students decide to attend college at all; older adults pursuing degrees; and the number of students attending from other states and abroad. For example, the federal government’s temporary pause on review of student visas in spring 2025 may affect how many international students were able to obtain visas in time to enroll for the fall semester at U.S. institutions.
Arrivals data for international students entering the United States shows that August showed an almost 20% drop from the same time last year.