Abstract. The author reviews the fundamental reasons for governments to subsidize tertiary education as a public good. He recommends gradual decrease of the state subsidy as percent of the total expenses, while the rest of the amount is to be funded by the student with the help of the recently introduced government-guaranteed loans. A claim is made that such an evolutionary change will increase students’ motivation and will improve the quality of education through healthy competition on the basis of a price/quality analysis. The author also claims that a system where “the funds follow the student” is superior to historical-value systems that do not take into account the success of the graduates and the quality of education in the respective professional field and institution.