Current challenges could increase college closures in the future, according to new study!
A recent study by the Federal Reserve Bank of Philadelphia suggests that many institutions may not survive current challenges and the rate of college closures could increase. According to their analysis, higher education is “facing serious financial headwinds, both due to long-term trends and to the post-pandemic recovery”.
“Colleges and universities are facing unprecedented fiscal challenges in today’s economic climate”, the Fed researchers wrote.
In 2024 alone, at least 20 colleges closed, and nine more plan to shut down in 2025, based on data from Implan, an economic software and analysis company. The Fed analysis found that the worst-case scenario projections indicate that up to 80 additional colleges could close between 2025 and 2029.
College Enrollment Has Declined
A significant factor contributing to college closures is declining enrollment. Fewer high school graduates are pursuing college right after graduation, and the overall number of college-age students is shrinking – a phenomenon called by experts as “enrollment cliff”.
From 2010 to 2021, student enrollment in degree-granting institutions dropped by 15%, the study found. Currently, only 62% of high school seniors immediately enroll in college, compared to 68% in 2010, according to government data.
This decline is particularly present among low-income students, who are increasingly pushed back by the rising cost of higher education. The soaring price of college, with some private institutions approaching six figures annually, has led many students to explore alternatives, such as entering the workforce, earning certificates, or pursuing apprenticeships.
“They don’t want to have the student loan debt”, Candi Clouse, a vice president at Implan, said.
Compounding the issue, challenges with last year’s Free Application for Federal Student Aid (FAFSA) rollout further reduced the number of students applying for financial aid, worsening the enrollment decline trend.
Financial Struggles and Closures of Colleges
The Fed study found that the financial pressures on colleges have intensified due to fewer students, rising operational costs, and restrictions on tuition at public institutions. These factors have left many schools unable to increase revenue.
When a college closes, the impact on local communities can be significant. Each closure affects, on average, 265 jobs and $14 million in labor income, according to Implan. “It can be huge for these small cities when they are reliant on an institution that has likely been there for generations”, Clouse said.
Some institutions have cut faculty and eliminated academic programs, including sociology, religion, music, and creative writing, to try cutting costs. However, while many colleges face financial struggles, the nation’s elite institutions continue to thrive, highlighting even more the divide between well-funded schools and those on the brink of closure.