The future of small private colleges is continuing to look bleak, according to a new report, with the rate of private college closures increasing to 11 per year and experts expecting it to continue rising.
Inside Higher Ed reports that in September 2015, Moody’s Investors Service predicted that private college closures, which averaged five per year, would triple by the end of 2017. The actual rate was just over double, though Moody’s expects the rate to continue to rise.
Last month, a report by Moody’s showed that 25 percent of private colleges ran budget deficits in 2017. The study found that smaller private colleges were experiencing net tuition decreases.
The closures have primarily affected smaller private colleges because of increased expenditures and decreasing revenue, Inside Higher Ed reports. One in five small private colleges is in serious financial trouble:
The median net revenue per student for this group covered about 65 percent of the median expense per student in 2012. In 2016, it covered just 53 percent. In 2016, it covered just 53 percent. The gap between revenue and expenses is becoming unsustainably high, Moody’s found. About one in five small private colleges is under fundamental stress.
While colleges have other sources of revenue, like gifts and endowment income, “for a few each year, these other sources will not be enough to make up for lost student charge revenue, leading to deep stress and existential questions,” the ratings agency wrote.
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