US Colleges Grapple With Closure Threat; Mergers and Transformations Emerge as Survival Strategies


While the immediate impact of the pandemic on college enrollment appears to be stabilizing, a gloomy forecast looms over the next 15 years for higher education institutions.

Financial woes, exacerbated by declining birth rates and shifting student preferences, are pushing numerous colleges to the brink. In the first ten months of 2023 alone, 30 colleges, including both nonprofit and for-profit institutions, closed their only or final campuses. This trend follows a wave of closures in 2022, signaling a challenging era for higher education. Experts predict that many more colleges will face enrollment challenges in the coming years, compelling them to consider mergers or significant operational changes to survive.

US Colleges Grapple with Closure Threat, Mergers and Transformations Emerge as Survival Strategies
(Photo : UNSPLASH / Evan Wise)

The Current Closure Landscape

According to an analysis by the State Higher Education Executive Officers Association (SHEEO), 30 colleges shut their doors in the initial months of 2023, continuing a trend that saw 23 nonprofit closures and 25 for-profit closures in 2022. This marks a significant increase from the previous average of nine nonprofit closures annually over the past two decades. The pandemic-induced enrollment declines have hit struggling colleges particularly hard, rendering their survival increasingly untenable.

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Enrollment Challenges: A Perfect Storm

Rachel Burns, a senior policy analyst at SHEEO, emphasizes that the financial struggles faced by many colleges are not rooted in corruption or mismanagement but, rather, an inability to rebound enrollment. Despite recent stabilization and slight increases in undergraduate enrollment, a prolonged decline in birth rates is set to impact the number of high school graduates after 2025. This demographic shift, coupled with evolving student preferences favoring larger and more selective institutions, poses an ominous challenge for regional private colleges.

Predictions for the Future

David Attis, managing director of research at education consulting company EAB, warns that hundreds of colleges are expected to witness substantial enrollment declines in the coming years. EAB's analysis of federal enrollment data predicts that by 2030, 449 colleges could experience a 25 percent decline, with 182 facing a 50 percent decline. These numbers are projected to rise to 534 colleges with a 25 percent decline and 227 with a 50 percent decline by 2035. By 2040, a total of 566 colleges may witness a 25 percent decline, with 247 facing a 50 percent decline. While these are predictions, they underscore the urgent need for colleges to proactively plan and make significant changes to weather the storm.

Survival Strategies: Mergers and Transformations

Facing a potential existential threat, colleges must contemplate mergers or transformative changes to navigate the impending enrollment cliff. Attis emphasizes that the scale of these challenges demands more than just trimming academic programs or administrative staff. Instead, institutions need a comprehensive reorientation of their strategies to secure their continued existence. Waiting until the verge of closure makes a college less attractive to potential partners, emphasizing the need for proactive decision-making.

Merging for Survival

Many colleges, both private and public, are already exploring or engaging in discussions about potential mergers. The urgency to find suitable partners is evident, as waiting until the last minute compromises an institution's negotiating position. Mergers present a viable option for colleges seeking to share resources, streamline operations, and ensure their continued relevance in a changing higher education landscape.

The challenges ahead for colleges are unprecedented, requiring visionary leadership and strategic planning to avoid closure. The looming enrollment cliff, coupled with shifting demographics and evolving student preferences, demands immediate action. While predictions offer a glimpse into a potentially dire future, they also serve as a wake-up call for higher education institutions to assess their viability and embrace transformative changes. Mergers, strategic reorientations, and proactive measures can be the lifelines that enable colleges to weather the storm and emerge stronger in the evolving landscape of higher education.

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