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Key Takeaways
- A report by Huron Consulting Group indicates that nearly 25 percent of private, nonprofit colleges in the U.S. may face closure within the next decade, potentially affecting 671,000 students and $23 billion in endowments.
- The report attributes financial crises to high tuition prices and an oversupply of college seats relative to student demand, suggesting that some colleges need to reduce tuition to remain competitive.
- Strategic partnerships, including mergers and acquisitions, are recommended to help struggling institutions become more resilient in the current volatile educational landscape.
- Additional factors contributing to declining enrollment include a decrease in high school graduates, fewer graduates attending college, and increased competition for older students, exacerbated by a strong economy.
Nearly one in four private, nonprofit colleges and universities in the U.S. could close due to financial problems within the next decade, according to a Huron Consulting Group report.
The report warns that “as many as 442 of the 1,700 private nonprofit degree-granting institutions … will arrive at the cusp of financial exigency.”
With more than four million students currently enrolled in nonprofit universities, 671,000 students and $23 billion in endowment assets could be affected.
Further, “Another 392 institutions with more than 800,000 students and $34 billion in endowments will face moderate existential threats,” the report states.
Between 2020 and 2025 alone, more than 130 private nonprofit colleges and universities announced closures or mergers, impacting nearly 200,000 students and more than $2 billion in endowment assets at the time.
The Huron report predicts this trend will significantly worsen over the next ten years.
Preston Cooper, a senior fellow with the American Enterprise Institute, attributed part of the issue to high tuition prices in an interview with The College Fix.
“Don’t underestimate the power of tuition reductions. Demand curves slope downwards—lower prices lead to more demand,” he said.
“Some of the struggling small liberal arts colleges are still charging outrageous sticker prices, which I simply don’t understand,” Cooper told The Fix via email.
Additionally, Huron Managing Director Peter Stokes told Bloomberg, “The problem is we have too many seats in too many classrooms and not enough prospective students to fill them.”
“Over the next decade, we’re going through a very painful but necessary rebalancing in supply and demand,” he said.
Offering a solution to the crisis, Huron researchers suggested building a “partnerships marketplace that connects financially challenged and financially solvent institutions to promote institutional resilience.”
“Strategic partnerships, including mergers and acquisitions, provide struggling institutions with a means to shape the fate of their missions, the disposition of their assets, and the well-being of their communities,” the report states.
“Forward-thinking leaders can acquire programs, talent, and assets that strengthen and diversify their portfolios, their reach, and ultimately, their resilience in an increasingly volatile climate,” it states.
Adding to these concerns, a recent report from the Education Advisory Board states that higher education is facing a crisis caused by “political volatility, financial strain, demographic headwinds, and rapid advances in AI.”
“The model was originally designed to survive isolated shocks—temporary enrollment declines, funding cuts, or cost increases; it was not, however, built to withstand the degree of synchronized compression to which it has experienced, whereby every major revenue stream and expense category is under pressure at the same time,” the report states.
It also notes that “Only 1 in 100 high school graduates with SAT scores of 1200+ can afford a private college without aid, and college-going rates, particularly among young men, continue to fall.”
Further, there is growing skepticism about the “value, affordability, and leadership credibility” within higher education. The report suggests that schools embrace “transparency and accountability.”
A 2024 study from the Federal Reserve Bank of Philadelphia estimated that up to 80 colleges may close in the next five years, The College Fix previously reported.
According to data from the State Higher Education Executive Officers Association, 28 colleges shut down last year. Over the past eight years, more than 100 colleges have shut down.
Robert Kelchen, a visiting scholar at the Federal Reserve Bank of Philadelphia Consumer Finance Institute, told The Fix last year that there are “three main drivers” contributing to the “declining enrollment.”
These three factors are “a decline in the number of high school graduates in much of the country, a decline in the share of high school graduates going to college, and a decline in older student enrollment due to a solid economy.”
