From 2016 to 2019, 86 colleges shut down or merged with other schools. College closures were a problem before the pandemic, and COVID-19 accelerated the issue. In 2022, 1 million fewer students are enrolled in college than before the pandemic began. As a result, nearly 3 in 4 higher education professionals say their institution is facing significant financial constraints.
With declining enrollment, schools compete for students to maintain tuition revenue. Despite rising costs, most universities operate with a tiny margin. The larger and/or more selective the school, the better a chance it has of survival. While endowments can give universities a pool of funds to draw from independent of student tuition, schools can’t spend more than 5% of their endowment each year without exposing the fund to market risk. Just over 100 universities have endowments over $1 billion.
Students need to protect themselves from attending a failing college. To gauge financial health, check endowment reports, new reports of declining enrollment or accreditation issues, and the Financial Responsibility Composite Score published by the US Department of Education. Be prepared for the possibility a college could close and be wary of transfer agreements that may extend the path to degree completion. Learn more about why colleges are shutting down in the infographic below: