Nepal is home to a population of 26.5 million that encompasses several ethnolinguistic groups speaking a total of 123 languages, of which about a dozen are spoken by major sections of the population. Despite being a poor country, with around 25% of its population living below the poverty line, Nepal has a tremendous potential for growth due to its abundant natural resources, strategic location between two of the largest and fastest-growing countries in the world (India and the People’s Republic of China [PRC]), and to its recently improved performance with respect to socioeconomic indicators. Higher education is expected to play a transformational role in addressing Nepal’s various developmental challenges, and in realizing Nepal’s development goals. The history of Nepal’s modern educational system is very brief, as it had its beginnings only in the late 1950s. When Tribhuvan University, the first university in the country, was established in 1959, Nepal’s gross enrollment rate in secondary education was less than 10%, and at the university level less than 1%. Higher education started expanding after 1990, with the establishment of several new universities, and of many new colleges through affiliations with Nepalese universities. Between 2005 and 2010 alone, the total number of colleges (referred to as “campuses”) including those that are constituent of and those affiliated with the country’s six universities and three medical schools expanded from 571 to 1,087. Of this total, 83 are university constituent campuses, 302 are affiliated community campuses (publicly funded), and 702 are affiliated private campuses. Between 1981 and 2010, student enrollment in higher education increased more than tenfold, from about 34,000 to about 408,000. Impressive as it sounds, this expansion represents a higher education gross enrollment rate of only 14%, still much lower than the global average of 26%. However, three new universities and a medical academy have recently opened. There are 11 broad areas of higher education in which programs are offered—agriculture and animal sciences, ayurveda, education, engineering, forestry, humanities and social sciences, law, management, medicine, science and technology, and Sanskrit. Over 15,000 faculty members are employed full-time at universities and campuses. A total of more than 65,000 students graduate each year at the bachelor’s level and higher. During the fiscal year (FY) 2011, the government spent about 1.5% of the national budget on higher education—about $4.4. billion, or 0.3% of Nepal’s gross domestic product (GDP). Out of the total education budget, higher education gets 8.1%, of which 90% is provided as block grants to the universities and community campuses. Despite the progress made thus far, and despite the resources now devoted to higher education, any efforts to develop the higher education system further face several challenges.