Source: Fortune
Summary
The number of U.S. high school graduates is expected to drop by 13% by 2041, according to the Western Interstate Commission for Higher Education. Colleges are struggling to fill seats as enrollment competition increases and costs rise. Some schools are merging or closing, with 80 institutions projected to shut down between 2025 and 2029. Financial pressures are forcing colleges to rely more on aid and tuition discounts, while enrollment in two-year programs grows. Robert Kelchen, a higher education finance expert, said nearly every college faces financial challenges.
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The numbers tell one story.
College enrollments are falling, but applications are rising.
Schools are spending more to attract fewer students.
Financial aid and tuition discounts are becoming standard.
Colleges are borrowing from endowments to stay afloat.
Author: Evan Null
The business of filling a classroom
How much a shrinking student population hurts a college depends in part on how much it relies on those students for revenue.
And for schools that depend heavily on tuition, competing for students can itself eat into the revenue each one brings in.
At private nonprofit colleges, nine in 10 first-time undergraduates received institutional grant aid in 2025-26, while the estimated tuition discount rate for those students reached 57.1%.
That leaves schools in a bind: They need tuition revenue, but charging closer to the sticker price can make it harder to fill the seats that generate it.
Students and their families know that they have more market power to negotiate financial aid, further affecting the bottom lines outside of a few dozen of the most prestigious universities.
When the math stops working
Hampshire College shows what the extreme end of that squeeze can look like. The private liberal arts college in Amherst, Massachusetts, is set to end academic operations after the fall semester.
It’s part of the so-called Five College consortium that also includes Amherst College, Mount Holyoke College, Smith College, and the University of Massachusetts Amherst, and its closure represents a dire warning that similarly vaunted schools could suffer the same fate.
But a school doesn’t have to be on the verge of closure to feel the same underlying pressures.
Syracuse University has a national brand and a $2.5 billion endowment, yet it fell short of its enrollment target this school year, contributing to a 1.5% budget shortfall.
International enrollment had fallen by half amid the Trump administration’s crackdown on student visas, while the university took on $458 million in debt last year to build new dorms.
Colleges in crisis
Kelchen said Syracuse is being hit by many of the forces affecting the broader industry. But it’s more vulnerable than some of its peers because it’s outside a major city or typical college town, and it’s located in a cold region with a declining number of high school graduates.
Even a sizable endowment doesn’t necessarily mean a college is safe as many are essentially house rich and cash poor.
“Colleges may have assets, but they are in their buildings or restricted endowment funds that they cannot use for daily operations,” Kelchen said.
While barred from directly drawing down that pool of money, nearly 200 private colleges still borrowed from restricted endowment funds in 2025, up from about 130 in 2021, according to estimates from higher-ed consulting firm Perspective Data Science.
Running out of cash on hand is the clearest indicator that a college is at high risk of closure, he added, while consistent operating losses, enrollment declines and large withdrawals from endowments can also signal distress.
The future of higher education
Kelchen expects an uptick in closures rather than a massive wave, with schools in rural parts of the Northeast and Midwest facing particularly strong headwinds.
For the colleges that remain open, that may mean becoming smaller institutions than they ever expected to be.
Colleges are rethinking their models as enrollment declines and costs rise.
Some are merging, others are closing, and many are struggling to stay afloat.
The higher education sector is in a state of flux, with no clear path forward for all institutions.
Alternative paths
The traditional four-year college path is facing more competition. Enrollment at public two-year institutions focused on vocational programs grew nearly 20% between spring 2020 and spring 2025.
And the price of a four-year degree is becoming hard to ignore, with annual sticker prices at dozens of U.S. colleges and universities now nearing or exceeding $100,000 when tuition, housing and other expenses are included.
As careers in skilled trades become more attractive alternatives to four-year degrees, fewer high school graduates are choosing to go straight to college.
The share enrolling immediately after graduation has fallen from 70% to 62% over the past decade.
One scenario modeled in the education policy journal Education Next found that a 15% enrollment decline over five years would result in 23 additional college closures.
