Traditionally, Kyrgyzstan, like other countries of the former Soviet Union, held a fairly high position from the standpoint of the population's average level of education. As of the beginning of period of transition, the level of education in Kyrgyzstan was relatively high. By 1991, the rate of literacy among the adult population was 97.7 percent. The transition to the market went hand in hand with a slump in the industrial sector of the economy, a decline that was brought to an end in 1995. The level of state support for education in Kyrgyzstan went down considerably, especially during the period of the slump. From 1995 through 2005 state spending on education fell from 7.1 percent to 4.9 percent of GDP. Nonetheless, however, the system of education in Kyrgyzstan is still considered, as it was in the past, to be one of the most important of the state's priorities, in spite of the difficulties. This article discusses the financing of higher education in Kyrgyzstan and offers possible options of state policy in the allocation of budget funds to higher educational institutions. (Contains 2 tables and 12 notes.)