The three core functions of higher education are teaching, research and community service. The performance of higher education has impact on national and social development. In recent years, the government of the ROC has invested much money on higher education to pursue innovations and reform. Nevertheless, higher education still faces challenges from within and without, and the problems need to be solved. This paper first analyzed the impacts of social changes, which include low birth rate, democratization, globalization, technological development, and sustainability factors, on higher education. Then, it examined the main issues of higher education, including self-governance, accountability, and the other eight issues. Finally, it presented the future directions and trends of higher education in Taiwan.