The subject of this master thesis is the financing of higher education in the Republic of Croatia, the transition process from education to the labor market and the analysis of highly educated people’s position on the labor market of the Republic of Croatia. Investing in higher education brings numerous benefits and returns to individuals, but also to society as a whole. The growth of the highly educated population leads to economic growth, reduction of unemployment, social inclusion, etc. Higher education is considered to be one of the basic preconditions for economic and social well-being. The two basic funding models of higher education are funding from public and private sources and a combination of these two is the most commonly used. The master thesis will demonstrate how much the funding sources are represented in individual countries, government expenditure of European Union countries for higher education and education as a whole as a percentage of GDP and will present data on the Croatian State Budget funds that finance higher education. Financial expenditures for student living expenses such as tuition, study and living expenses are not negligible, so financial support for students plays an important role in terms of scholarships and subsidies for accommodation and meals. With the advent of increasing privatization of higher education, the acquisition of higher education depends on student income or family income, so one of the solutions for financing the acquisition of higher education are student loans. The master thesis analyzes the supply and demand of highly educated people on the labor market, harmonization of the education system and enrollment quotas at higher education institutions with the needs of the labor market. One of the problems of the Republic of Croatia is youth unemployment, which is still high, although it has significantly decreased in recent years. The master thesis will also analyze the causes of its reduction, as well as measures to encourage youth employment and how effective the measures are.