Why Are So Many Colleges in Danger of Closing?

According to a study by Vanderbilt University, an average of five non-profit colleges and universities closed every year between 2003 and 2013.

This is a disturbing trend and it is likely to continue and even accelerate over the next few years. But how could so many universities be closing when it’s the students who are drowning in debt?

According to Moody’s, it’s because one-third of all American higher education institutions are on a path of financial instability – and that path is not projected to be sustainable over time.

There’s no one reason that American school’s finances have reached this state. Rather, it’s a whole list of reasons and each impacts individual colleges differently.

Declining Enrolment

College enrolment is declining and this is impacting colleges across the board – both big and small.

Part of this is caused by the fact that high school graduation rates have flat-lined. But the lackluster graduation rate isn’t the only cause of enrolment woes.

Enrolment began declining during and after the 2008 crash, but it also hasn’t recovered in part because tuition and student loan debt have both grown at rates that create for wary prospective students.

Students are looking for a return on such a large investment and many of them aren’t seeing it in the marketplace.

While all colleges are affected by declining enrolment, it’s the smallest colleges that struggle the most with these figures, particularly if they don’t have trusts to rely on and must navigate their financial woes.

Smaller Market Shares

Small private colleges have traditionally held a unique place in the higher education landscape of the United States.

But that landscape is changing dramatically, and those colleges have failed to keep up with what students now want and need from colleges, particularly for the price demanded by these institutions.

New, online institutions and traditional universities deploying online programs are tuning in to what students want, and smaller colleges struggle to gather the finances to compete. Combined with dwindling college enrolment, small private colleges are struggling to maintain a piece of a shrinking market.

Will Small Colleges Go Extinct?

Small colleges may suffer financially over the next few years, but the idea of extinction remains alarmist.

First, the Moody’s report considers closures and mergers of small colleges to be the same thing, but they derive from very different natures. In fact, mergers can be positive for both parties because they drive what is most important – providing students what they want in a small setting.

Indeed, if one considers that small colleges are changing – not closing completely – the landscape looks slightly more positive.

The higher education landscape will continue to be challenged by new trends and just as in any sector, those institutions that fail to adapt risk failure. Learning lessons from the schools failing now will only make them stronger in the future.


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