The College Fix

But colleges might make ‘painful cuts’ to stay open, expert says

Up to 80 colleges may close in the next five years, according to a study from the Federal Reserve Bank of Philadelphia.

This estimate comes as 28 colleges shut down last year, according to data from the State Higher Education Executive Officers Association. Over the past eight years, more than 100 colleges have shut down, as reported by The College Fix.

The authors of this study call the trend “a major higher education policy issue.” One of the researchers provided further comment to The Fix via email.

Robert Kelchen, a visiting scholar at the Federal Reserve Bank of Philadelphia Consumer Finance Institute, described “three main drivers” contributing to the “declining enrollment.”

These three factors are “a decline in the number of high school graduates in much of the country, a decline in the share of high school graduates going to college, and a decline in older student enrollment due to a solid economy.”

“Not much can be done about the first factor, as it’s a math problem that colleges cannot solve,” Kelchen told The Fix via email.

“The second is something that may change in the future when we get the next recession, but there is more skepticism about the value of higher education than in the past,” he said. “And the third is largely due to the ability to get decent jobs now without college, which typically changes during recessions.”

The model has already been tested and found to be largely successful.

The analysis selected “100 institutions with the highest predicted probability of closure,” based on factors such as enrollment declines, high tuition discounts, and shrinking endowments, among others, according to the report.

These included declining enrollment, weak finances that have triggered federal oversight, demographic shifts, and an overreliance on tuition revenue. Researchers found 84 of these 100 institutions had closed within three years.

Closures could hurt small towns the most

The researchers said increased funding during COVID-19 may have delayed the “anticipated increase in college closures,” however, it could not make up for the “resulting enrollment decline” and “high inflation.” This hit smaller colleges the hardest, according to researchers, which in small towns often act as an “anchor” for local economies.

Kelchen illustrated to The Fix how metropolitan areas can manage closures more easily, but small towns may suffer from losing the institution, which functions as an “economic and cultural engine.”

“When those colleges close, other businesses can close as the population drops and the community can lose some of its ties to the broader area,” he told The Fix. “We are hoping to quantify some of these effects in future work.”

A senior fellow at the Progressive Policy Institute also said the enrollment decline is a key factor, but said colleges purposefully raise “tuition in order to increase the prestige of their school.”

Paul Weinstein Jr., a professor at Johns Hopkins University, told The Fix that George Washington University’s former President Stephen Trachtenberg, openly admitted to this strategy.

Weinstein also worked on fiscal issues for President Barack Obama and served as the chief of staff for President Bill Clinton’s Domestic Policy Council.

Another factor is the falling fertility rate, according to the report. An education expert at the Heritage Foundation confirmed the consequences of falling fertility.

“Our fertility rate in America is below replacement and that trend’s going to continue and speed up in the years to come,” Lindsey Burke told The Fix over a phone interview.

The director of the think tank’s education policy center said, “there are a lot of forces at play as to why we’ve seen declining enrollment.”

“Policies of the Biden admin have only exacerbated the problem and infused an incredible degree of uncertainty in higher education,” Burke said, referring to the various financial aid system errors that delayed or miscalculated many students’ aid for college.

Kelchen, the co-author of the Federal Reserve study, said colleges closing does not mean the end of higher education in America.

“While we expect the rate of college closures to increase at least somewhat, it won’t be the mass extinction event that many have predicted,” he told The Fix. “Colleges are stubborn or resilient, depending on who you talk to, and many of them care deeply about their mission. They will do everything possible to avoid closure and are now more willing than ever to make painful cuts to stay open.”

“It’s a tough go for many of these colleges, but most will find a way to keep going in spite of challenges.”

MORE: Diversity course enrollment drops after school stops ordering students to take it

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