College closures set to increase amid enrollment drop: Fitch

The United States may soon see more higher education institutions shut their doors after college enrollment has declined in recent years, according to a new analysis.

A report from Fitch Ratings stated that “further closures, mergers and significantly reduced operations are inevitable” for a handful of colleges due to low enrollment numbers and high tuitions. Fitch noted it does not expect “widespread closures or downgrades” but said higher education institutions will have to evaluate what programs and departments meet their goals.

Fitch warned colleges that do not have “strong brands” and are in markets where there is a steep decline in college-age adults are more likely to suffer from enrollment drops. It noted that high school graduates are expected to drop by 11 percent by 2036 in the Midwest when compared to the 2018-19 academic year.

“Meaningful and persistent declines in student fee revenue, usually the result of unexpected enrollment drops, are common precursors to consolidation or closure,” the analysis states.

“Red flags that indicate enrollment vulnerability often include volatility in incoming class size, frequent or unusual turnover in student recruitment functions, unsustainable levels of endowment support for student scholarship, and declines in the net tuition per student metric, whether due to changes in sticker price or discounting,” the analysis added. 

Without steady enrollment rates, small private colleges are the most at risk because they are more likely to rely heavily on tuition as their main revenue stream, Fitch also noted.

A few colleges — including Alliance University and Medaille University in New York — have already closed this past year, while others have merged with neighboring institutions.

Undergraduate enrollment fell for the third straight year in 2022, with data showing that about 1.3 million fewer students enrolled in a higher education institution during the two previous years. Community college enrollment has also plunged by nearly 40 percent since 2010, demonstrating a potential loss of confidence in the two-year college sector.