Federal research predicts a surge in college closures due to financial difficulties.

• As college enrollment declines, more institutions are facing financial instability.
• New research from the Federal Reserve Bank of Philadelphia suggests that as many as 80 colleges and universities could shut down over the next five years.

While many individuals value the importance of college, higher education institutions have generally remained financially stable despite facing significant challenges.

A new study predicts that the number of colleges closing in the next five years will increase significantly.

The Federal Reserve Bank of Philadelphia's working paper states that higher education is facing serious financial challenges due to both long-term trends and the post-pandemic recovery.

In the current economic climate, colleges and universities are confronting unparalleled financial difficulties, according to Fed researchers.

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Implan reports that 29 colleges closed in 2024 and 2025, according to their latest tally.

The Fed analysis predicts that as many as 80 colleges could shut between 2025 and 2029 in the worst-case scenario.

College enrollment is down

The "enrollment cliff" refers to the trend where not only are fewer high schoolers enrolling in college immediately after graduation, but the overall population of college-age students is also decreasing.

The decline in enrollment is a significant challenge, with the number of students enrolled in degree-granting colleges and universities decreasing by 15% from 2010 to 2021, according to Fed researchers.

High school seniors in the U.S. are no longer immediately going to college as often as before, with only 62% doing so, down from 68% in 2010. Low-income students are the ones who are most likely to opt out, feeling priced out of postsecondary education.

With the cost of private college tuition approaching six figures, students are increasingly exploring alternatives to a four-year degree, including entering the workforce, completing certificate programs, or undertaking apprenticeships.

Implan's vice president, Candi Clouse, states that ballooning costs have significantly influenced a shift in mindset.

She stated that they do not desire to have student loan debt.

Last year's Free Application for Federal Student Aid rollout problems could lead to fewer students applying for financial aid, which may result in declining enrollment, as experts had warned.

A wave of colleges in financial crisis

The Fed report discovered that growing competition for fewer students, higher operating costs, and state-imposed restrictions on tuition increases for public colleges have constrained institutions' capacity to boost tuition revenue.

According to Implan's Clouse, some colleges and universities are facing a severe financial crisis.

""Colleges are being right-sized due to the decline in national birthrates and the rising costs of education and operations," she stated."

At a local level, these closures can be devastating, Clouse added.

"The closing of a school causes chaos for many individuals," she stated.

According to Implan's calculations, each college or university that closes results in an average loss of 265 jobs and $14 million in labor income.

For small cities, it can be significant when an institution that has been there for generations is reliant on them.

Since the pandemic, federal funding has been a temporary solution for colleges facing financial difficulties. However, in recent years, there has been an increase in schools declaring "financial exigency," as reported by the Fed.

In order to remain financially stable, certain colleges have reduced their faculty and eliminated academic programs in areas such as sociology, creative writing, music, and religion.

Despite the struggles of some schools, the country's top institutions are thriving.

College applications are up

The latest data from the Common Application shows that the overall application volume for the 2024-25 season increased by 10% compared to the previous year, despite a rising trend of applicants applying exclusively to public schools.

Other reports indicate that a private college education is increasingly limited to those who can afford it.

According to the National Bureau of Economic Research, children from families in the top 1% are more than twice as likely to attend highly selective private colleges, perpetuating the persistence of privilege across generations.

The cost of attending a four-year private college in the 2024-25 school year was $58,600, an increase of $2,210 from the previous year. Meanwhile, the cost of attending a four-year in-state public college in the 2024-25 school year was $24,920, an increase of $840 from the previous year, according to the College Board.