A recent State Higher Education Executive Officers Association (SHEEO) State Higher Education Finance (SHEF) FY 2025 report suggests that public higher education funding is at a potential crossroads. Education appropriations per full-time equivalent (FTE) student peaked in FY24, then declined by 1.0% in FY25. It is unknown whether this recent downturn marks the beginning of a downward trend or is just a glitch in the previous 12-year run of increases.
Based on their data, the authors highlight both reasons for optimism about future funding and reasons for concern.
Historical context provides one reason for optimism. The highest peak in funding, according to the SHEF dataset, occurred in 1980, followed by steady increases in the past decade. These are clear signs of strong support for public higher education funding.
Also on the positive side, if one adjusts for inflation but not for full-time equivalent (FTE) enrollment, total public investments in higher education have grown. Investments were $127.4 billion in 2024 and $130.7 billion in 2025, a 2.6% increase.
Not adjusting for FTE enrollment skews the significance of FY25’s 1.0% decrease per student, making it perhaps more ominous than it needs to be. Significantly, enrollment increased by 3.6%, outpacing increases in education appropriations; the amount of funding per student decreased simply because there were more students.
The report authors also show confidence in the U.S.’ economic resilience. Reductions in education appropriations per student tend to increase when inflation increases. The authors point out that, based on current economic indicators, the national economy grew throughout 2025. If the U.S. avoids an inflationary period, public higher ed funding would be expected to remain stable or even increase.
On the other hand, the recent downward trend in public funding for higher education could continue and accelerate rapidly should a recession occur.
Also of concern are states’ fiscal constraints as they adjust to post-pandemic fiscal situations. As the authors note, “most states are now projecting minimal year-over-year expenditure increases in the near term.”
The concern is greatest for the 24 states that allocated per-student funding in 2025 that was lower than in 2008, before the Great Recession. The states furthest from recovering from the Great Recession are Arizona (47.4% below the 2008 level), Louisiana (37.1% below), and Iowa (29.2% below).
There is also significant concern about the widely predicted demographic cliff. FTE enrollment significantly increased from 2023 through 2025, after having declined for 11 years following the Great Recession. These recent gains might appear to be reasons for optimism, except that the 2025 enrollment number is still 1.3% below 2019 levels. The trend is likely to turn downward again because, as the authors note, “broader demographic changes predict fewer traditional-age students over the next decade.”
A fully interactive version of this report, with adjustable visualizations and downloadable datasets for all figures and tables, is available at shef.sheeo.org.
This page was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.