Lana Oconnell
The higher education sector is currently facing a crisis, with an increasing number of colleges and universities closing their doors. This trend has accelerated since the COVID-19 pandemic and is showing no signs of slowing down. Financial instability, declining enrollment, and rising costs are the main factors contributing to this wave of closures, affecting both for-profit and nonprofit institutions. As a result, tens of thousands of students have had their educational journeys disrupted, with many facing challenges in transferring credits and continuing their studies. With the Federal Reserve Bank of Philadelphia predicting that up to 80 colleges could close by the end of the 2025-26 school year, the future of higher education in the United States looks uncertain.
| Characteristics | Values |
|---|---|
| Number of colleges and universities granting at least associate degrees closed from 2008-2024 | 312 |
| Number of public or non-profit colleges that have closed, merged, or announced closures or mergers since March 2020 | 79 |
| Number of colleges that have closed or announced closures since March 2020 | Over 40 |
| Number of students impacted by private non-profit college closures since 2020 | 47,960 |
| Number of jobs lost on average when a college closes | 265 |
| Average economic impact of a college closure | $67 million a year |
| Number of colleges that closed or announced their closing in 2022 | 13 |
| Number of colleges that closed or announced their plans to close in 2023 | 26 |
| Number of colleges that shut down in 2023 that were religious | 10 |
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What You'll Learn
Falling birth rates and declining college enrollment
Declining college enrollment has been a pressing issue in the United States, with a 15% drop in enrollment reported from 2010 to 2021. This trend is projected to continue, with a further decline in enrollment expected in 2025 due to falling birth rates. The phenomenon has been dubbed the "enrollment cliff" or "demographic cliff", highlighting the significant decrease in the number of 18-year-olds, who are typically college-bound high school graduates. This decline in the college-aged population is attributed to the falling birth rates that began around the Great Recession of 2007 and have persisted since.
The implications of falling birth rates and declining college enrollment extend beyond education. With fewer college graduates, there will be a reduction in the number of skilled workers available to fill critical jobs, impacting the economy. The closure of colleges, particularly small institutions, also results in job losses for faculty and staff and can have a substantial economic impact on the local community, especially in rural areas.
Financial instability is a primary driver of college closures, and declining enrollment exacerbates this issue. Colleges with lower enrollment may struggle with revenue shortfalls and increasing expenses, ultimately leading to closure. Additionally, technical difficulties with financial aid applications, such as the Free Application for Federal Student Aid (Fafsa), have contributed to enrollment declines as students and their families are left uncertain about the financial aid they may receive.
The cost of college is a significant barrier to enrollment, and rising tuition fees have made it challenging for many to pursue higher education. This is particularly true for adults who need to work while studying. However, it is important to note that the decline in enrollment is not solely due to financial factors. The perception of the value of a college degree has also changed, with fewer people considering it extremely important to get a good job.
To adapt to these challenges, some colleges are embracing non-traditional students and foreign applicants. However, this may not be enough to prevent closures, as seen with Iowa Wesleyan College. The complex interplay of falling birth rates, economic factors, and shifting perceptions of higher education presents a multifaceted challenge for colleges and universities in the United States.
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Financial instability and high operating costs
The University of Phoenix, a former for-profit giant, was recently acquired by the nonprofit University of Idaho, illustrating the shift in the higher education landscape. Additionally, a Federal Reserve Bank of Philadelphia report from December 2024 highlighted fiscal challenges and enrollment declines as significant predictors of college closures. The report analyzed two scenarios: an abrupt, significant enrollment drop and a gradual enrollment decline over five years. In the first scenario, 80 colleges could close, affecting over 100,000 students and 20,000 staff members. The second scenario projected an average of 4.6 college closures per year, impacting over 7,300 students and 1,200 staff annually.
Colleges and universities have experienced a notable decline in enrollment, with a 15% drop between 2010 and 2021, according to the National Center for Education Statistics (NCES). This includes a significant loss of more than 350,000 students during the initial year of the COVID-19 pandemic. The pandemic has accelerated the financial strain on colleges, and the Federal Reserve Bank of Philadelphia predicts an increase in college closures.
The impact of college closures extends beyond students, affecting faculty, staff, and the local community. Robert Kelchen, a professor at the University of Tennessee, Knoxville, and an expert in higher-education finance, emphasizes the economic repercussions for the surrounding area, especially in rural regions. The closure of colleges results in job losses and can disrupt the local economy.
Financial distress in colleges can be attributed to various factors, including declining enrollment, revenue decreases, and rising expenses. UArts, for example, closed due to these financial challenges, leaving students and faculty in a difficult situation. Additionally, the university's accreditor stripped UArts of its accreditation, which is necessary to receive federal financial aid funds. This further exacerbated the financial woes of the institution.
In conclusion, financial instability and high operating costs are critical factors contributing to the closure of colleges and universities. These closures have far-reaching consequences, impacting students, faculty, staff, and local communities. As financial challenges and enrollment declines persist, it is anticipated that more colleges will face closure, necessitating proactive measures to mitigate the adverse effects on all stakeholders.
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Loss of accreditation and federal funding
The loss of accreditation and federal funding is a significant concern for colleges and universities facing closure. Financial instability is the primary cause of college closures, according to a 2022 report by the State Higher Education Executive Officers Association and the National Student Clearinghouse Research Center.
Accreditation is crucial for colleges and universities to maintain their legitimacy and access federal financial aid funds. When a college loses its accreditation, it not only suffers a blow to its reputation but also endangers its financial stability. This is because accreditation is a requirement for receiving federal financial aid funds, which are a significant source of funding for many institutions.
The decline in college enrolment, pressure to lower tuition fees, stagnating state funding, and a shrinking pool of high school graduates have contributed to financial strains for many institutions. As a result, some colleges have struggled with declining enrolment, drops in revenue, and ballooning expenses. For example, UArts, which abruptly closed its doors, cited these financial challenges as contributing factors.
When a college loses its accreditation and federal funding, it enters a downward spiral. The loss of funding further exacerbates financial woes, making it difficult for the institution to maintain its operations and serve its students effectively. This can lead to a loss of confidence in the institution, causing prospective students to look elsewhere and further diminishing the college's enrolment and financial stability.
In addition to the direct financial implications, the loss of accreditation and federal funding can have indirect effects. For instance, it can lead to a decline in the quality of education as the college may struggle to retain faculty and staff, who are integral to the educational experience. Additionally, the local community may be impacted, particularly in rural areas where the presence of the institution contributes significantly to the local economy.
To mitigate the potential loss of accreditation and federal funding, colleges and universities must address the underlying financial challenges. This may involve adapting to changing demographics, finding new sources of revenue, and carefully managing expenses. Additionally, institutions should prioritize transparency and timely communication with their students, faculty, and staff in the event of financial distress to allow them to make alternative plans if necessary.
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Impact on faculty, staff, and local communities
The closure of colleges and universities has a significant impact on faculty, staff, and local communities. When a college closes, it can leave faculty and staff without jobs and sometimes without severance packages. This can result in a loss of income and financial hardship for those affected. The timing of a closure announcement is crucial for faculty members, as they may have a better chance of finding a new job if the announcement is made before the start of the academic hiring cycle. Institutions should also provide support to staff as they seek new employment and plan for the possibility that they may leave their jobs before the official closing date.
In addition to job losses, college closures can also have a significant economic impact on the local community. According to the NCES, the closure of a college can result in an average loss of 265 jobs and $67 million per year in economic impact. This can be particularly devastating for rural areas that rely heavily on the presence of the institution for their economic well-being. The closure of small colleges can also lead to a reduction in the diversity of educational offerings, as these schools often provide unique programs that may not be available elsewhere.
The closure of colleges can also contribute to a broader "demographic cliff," a term used to describe the expected long-term decline in the number of 18-year-olds, who are the traditional age for entering college. This decline in the number of college-aged students has been predicted since the Great Recession, which saw a falling birth rate that has not recovered. As a result, colleges and universities have experienced a collective 15% decline in enrollment between 2010 and 2021, with more than 40 million Americans starting but not completing their college education. This trend is expected to have broader implications for the economy, as the United States falls behind other developed nations in terms of the proportion of its population with post-secondary degrees.
Furthermore, college closures can disrupt the lives of students, with only about 37% of those affected by closures completing their degrees. Students may face challenges in transferring credits to other institutions and may lose out on the unique educational opportunities provided by small colleges. Additionally, the closure of colleges can lead to a loss of historical institutions, as some schools shutting down have centuries of history behind them.
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Challenges for students: transferring credits and debt
The closure of colleges and universities poses significant challenges for students, including financial difficulties and disruptions to their education. When a college closes, students may be left with outstanding debt and incomplete degrees. In such cases, students may have the option to finish their program at another school or apply for a discharge of federal student loans. However, the process of transferring credits can be complex and time-consuming, often resulting in the loss of credits and delaying graduation.
Challenges in transferring credits
The transfer of college credits from one institution to another can be a challenging and complex process for students. The United States Government Accountability Office (GAO) reports that the average transfer student loses 43% of their credits when moving to a different college or university, which can amount to a semester's worth of lost time and effort. This loss of credits can be attributed to various factors, including lengthy wait times for transcript and credit evaluations, confusion over transfer agreements, and institutional policies or differences in course content.
To address these challenges, educational institutions are increasingly leveraging digital credentials to streamline the credit transfer process. Digital credentials allow students to securely showcase their prior learning and achievements, providing a more efficient way to transfer credits between institutions. Additionally, organizations are utilizing technology to facilitate a simpler and more seamless transfer experience for students.
Financial challenges
Student loan debt is a significant challenge for college and university students, often resulting in lasting economic burdens. The inability to complete a degree program due to college closures can further complicate students' financial situations. Students may be left with substantial debt and no credential to show for it, impacting their credit and financial health. This can be particularly detrimental to first-generation, low-income, and minority students who may lack the generational wealth to support their education.
The process of transferring to another institution can also incur additional costs, as students may need to repeat courses that do not transfer or count toward their degree. This can lead to increased reliance on financial aid or out-of-pocket expenses. Furthermore, the closure of a college or university can have broader economic impacts, affecting the local community and staff who may lose their jobs without severance packages.
In conclusion, the closure of colleges and universities presents significant challenges for students in terms of transferring credits and managing financial obligations. The complex credit transfer process and the loss of credits can delay graduation and increase financial burdens. Additionally, the disruption of their education and the potential loss of federal financial aid can further exacerbate students' financial distress. To mitigate these challenges, students may benefit from improved access to information and resources, as well as streamlined processes for transferring credits and resolving debt-related issues.
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Frequently asked questions
If your college closes, you can take steps such as finishing your program at another school or seeking a discharge for federal student loans.
Financial instability is the primary cause of college closures. This is due to declining enrollment, drops in revenue, and ballooning expenses.
College closures can prevent students from finishing their study programs and obtaining their degrees. It can also lead to a loss of school fees, difficulty in transferring credits, and a lack of clarity surrounding the closure.
Small, private colleges with low enrollment and financial issues are more likely to close. Religiously-affiliated colleges, such as those supported by Christian missionaries, are also at risk of closing.
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