With the onset of new public management, there is a shift in the methods of financing of higher education institutions across the countries of the world, particularly emerging market economies, from public financing to private financing of higher education. Many countries adopted this shift very quickly while others have moved towards a gradual shift in adopting new systems to various extents. With the gradual decline in public financing of higher education institutions in developing countries like India, due to the competing demand for public funds and thereby privatization of public higher education institutions to share the cost of higher education to meet the growing demand for higher education, there are many new innovative methods that are adopted to finance higher education institutions. Further, the massification of higher education has encouraged the expansion of private higher education institutions to meet the sudden burst in the demand for higher education. The article discusses the issues and challenges in implementing the innovative methods of financing across the developed and developing countries with special regard to their implementation in a developing country like India.