The development of higher education, as a consumption product and an investment product, is an important factor to affect the change of consumption and savings of Chinese residents, in 1999, China began to reform higher education by enlarging enrollment scale and by collecting tuition fees and incidental fees as main contents of the reform, and unit root method test shows that China’s higher education enrollment scale in 1999 underwent structural break, meanwhile, the cointegration relation between the enrollment number of higher education and the consumption quantity of Chinese residents and between the enrollment number of higher education and the balance of yearend consumption of Chinese residents also changed. Further empirical analysis shows that the impact of China’s higher education development on the consumption and savings of Chinese residents can be approximately categorized into such three periods as squeezing out consumption and driving savings during 1956—1965, driving consumption and squeezing out savings during 1970—1998 and squeezing out consumption and driving savings during 1999—2010. Because the increase of tuition fees and incidental fees of higher education surpassed the increase of income growth of Chinese residents, because Chinese youths are desired to obtain higher education and because higher education resources allocation is not balanced, current higher education reform can not expand domestic demand in short-term, as a result, the overall income level of Chinese residents must be raised so that domestic demand can be effectively enlarged by higher education development, meanwhile, Chinese Government should consolidate financial support for higher learning institutions, reduce tuition fees and incidental fees of the institutions and enhance the support for the higher education development in the areas with the residents with low income.