Adverse macroeconomic conditions and keen intersectoral competition for public funds have reduced the ability of LDC governments to continue expanding education. This article discusses three broad policy options which address the current crisis in education: recovering the public cost of higher education and reallocating government spending toward the level with the highest social returns; developing a credit market for education, together with selective scholarships, especially in higher education; and decentralising the management of public education and encouraging the expansion of private and community supported suburbs.