By the 1980s, a combination of rising per unit-student cost and accelerating demand for higher education had pressured European states to question whether they could afford to maintain their largely public supported higher educational systems. By the first decade of the twenty-first century, in more and more countries, massification of higher education had brought about a funding crisis in higher education (Hahn 2007; Woodhall 2007). Numerous countries found it increasingly difficult to sustain higher educational systems substantially, if not totally, funded by public revenues. To curtail government funding, many countries turned to the “private sector — represented by households, businesses and philanthropists — [to take on] even greater responsibility for the costs of higher education” (Hahn 2007, p. 3). Except for United States and a handful of other countries where historically private finance has played a large role in the provision of higher education, many countries adopted varying cost-sharing systems to support mass higher education (Johnstone 2009; Johnstone, Arora and Experton 1998).

For the developing world, several distinctive factors have contributed to their crisis of financing higher education, such as; “pressures for enrolment expansion given the relatively low enrolment ratios”, “higher education has been the fastest-growing segment of the education sector”, “rapid increase has driven high levels of subsidization”, and public budget allocation limitations (World Bank 1994, p. 2). With the ascendance of neo-liberalism and its promotion of the market and privatization since the 1980s, the prevailing solution adopted is to diversify public higher education's sources of funding and to expand the privatization of higher education. The World Bank indeed advocates “mobilizing greater private financing, including cost sharing with students”, to support higher education (World Bank 1994, p. 40).

Malaysia too experienced several of the distinctive factors that led to higher education funding crisis in the developing world; it rapidly raised the enrolment ratios from low to high, public spending on higher education grew much faster than for primary and secondary, public higher institutions were and remain largely subsidized by the government, and the switch from elite to mass higher education. Similarly, the Malaysian government adopted a cost sharing system to finance higher education where increasingly students and parents are responsible for the cost as well. However, the growth and pattern of financing higher education is also shaped by the politics and political system of a country.