Date Uploaded: 29/08/2016
He claimed that presidents of the country's universities and institutes were unwilling to fully expose the "elephant in the room" because it could affect applications.
Mr Martin wants the Government to invest as much as €100m in third-level education from the €650m available for spending in October's Budget.
He told the Irish Independent that the recently published Cassells Report on funding for education showed that "a real crisis" had already taken hold.
"The universities and institutes are in a difficult position; they can't announce how bad it is because they don't want to damage their reputations," said Mr Martin.
"People have said this to me privately as I've gone around.
"I've met the presidents of universities and institutes. It's very clear that there has been a drop in funding over the last six years."
The number attending third-level is expected to grow by 30pc over the next decade, with experts believing that an extra €1bn will be needed to prevent a drop in standards.
The Cassells Report suggested three funding options: a fully state-funded system; maintaining the current system of student registration fees but increasing exchequer funding; or an income-contingent loan system.
Mr Martin said his party favoured the second option, which would see the existing €3,000 registration fee remain in place, while the State invests more money from general taxation.
The Cassells Report recommended an immediate increase of €120m per year over the next five years.
Asked how much the Government should direct towards third-level, Mr Martin said: "I think a substantial amount of it, to be frank. In our manifesto, we have put in a €100m allocation.
"Now, there will be other competing demands but we get no sense at the minute that anybody in the Dáil is factoring in the Cassells Report.
"Yet if you want to be strategic about the future of the country, it's without question that increased participation at third-level, improving the quality of third-level over the last 40 years was a key determinant factor in winning foreign direct investment and developing the Irish economy."
Mr Martin noted that the previous government had raised college registration fees by €1,000 but said it then used this to reduce State funding.
Fianna Fáil is also expecting the reintroduction of postgraduate grants in the Budget.
"We've been saying that for some time. We put it in the 'confidence and supply' agreement and there has to be movement on that," added Mr Martin.
Journalist: Kevin Doyle