Although American higher education now has the opportunity to make significant contributions to the national welfare, the rapid expansion of colleges and universities and the exhaustion of state tax potential have produced a critical situation in public higher education. Massive increases in enrollments at both the undergraduate and graduate levels are threatening the quality of higher education and jeopardizing universal educational opportunity. Both public and private institutions have suffered serious financial strains in the past decade from the pressures of inflation, necessary salary increases, the explosion of knowledge, and educational technology. Inability to meet rising tuition costs has caused an extensive loss of talent. To help solve the institutions' financial plight, a broad and substantial program of federal support is recommended. Appendices contain data on enrollments, institutional expenditures, state, federal and local expenditures and sources of revenue, family income of students, and talent loss. (JS)