Could Your College Close Before You Graduate? What Every Family Should Know
- jchassell
- 2 days ago
- 6 min read
Don't Panic: Most Colleges Are Financially Stable
For decades, families have asked the same questions when evaluating colleges: Is it a good academic fit? Can we afford it? Will my student be happy there? Today, there's another question worth asking: Will this college still be financially healthy four years from now?
Over the past several years, a growing number of colleges have announced closures, mergers, or significant financial challenges. While these stories have generated headlines, they shouldn't create panic. Instead, they should encourage families to become informed consumers as they build their college list.
Recent college closures have received significant media attention, particularly when well-known institutions such as Hampshire College (part of the 5 College consortia that includes UMass Amherst, Mount Holyoke, Smith, and Amherst College) announce plans to close or merge.
While these stories are understandably concerning, it's important to keep them in perspective.
There are approximately 2,000 private nonprofit four-year colleges in the United States.
Historically, only a small fraction close in any given year. Although closures have become more common over the past decade due to demographic and financial pressures, they still represent well under 1% of colleges annually. The purpose of this article isn't to create fear. It's to encourage families to ask thoughtful questions and understand the long-term financial health of the colleges they're considering.
As a college admissions counselor, I'm not suggesting families avoid every small private college. In fact, many are outstanding institutions. But I do believe every family should understand the financial health of the colleges on their list before making such an important investment.
Why Are Some Colleges Closing?
No single factor is responsible. Instead, many colleges are facing several challenges at once.
1. The Demographic Cliff
Beginning in 2025, colleges are experiencing the long-anticipated decline in the number of traditional college-aged students. Birth rates dropped significantly during the Great Recession, resulting in fewer 18-year-olds graduating from high school today. In some states, the decline is expected to exceed 30 percent over the coming years. As one higher education expert put it, "We have too many seats for not enough students."
2. Rising Tuition Costs
The cost of attending college has increased dramatically over the past two decades. Many families are becoming more thoughtful about the return on their investment. They want to know that a college will provide meaningful opportunities for learning, mentorship, internships, networking, and personal growth while preparing students for whatever path they choose after graduation.
3. International Student Uncertainty
Many colleges, particularly smaller private institutions, rely heavily on international students.
Changes in visa policies, geopolitical uncertainty, and fluctuations in international enrollment can create significant financial challenges for colleges that depend on this tuition revenue.
4. Federal Student Loan Changes
Recent changes to federal student loan programs, including new limits affecting Parent PLUS borrowing under the One Big Beautiful Bill Act, may make it more difficult for some families to finance high-cost colleges. Institutions that rely heavily on tuition revenue may feel increasing pressure if fewer families can borrow enough to cover the full cost of attendance.
5. Aging Campuses and Deferred Maintenance
Many colleges have beautiful, historic campuses that attract students. But older buildings can also come with high costs. Over time, some institutions postpone expensive repairs or renovations to residence halls, academic buildings, heating and cooling systems, roofs, plumbing, electrical infrastructure, and accessibility improvements.
This is known as deferred maintenance. The problem doesn't go away. In fact, it usually becomes more expensive.
Some colleges carry hundreds of millions of dollars in deferred maintenance obligations, making it increasingly difficult to balance campus improvements with operating expenses. When enrollment declines, these capital needs become even harder to address.
6. Higher Interest Rates
Over the past several years, colleges have also faced a much higher borrowing environment.
Many institutions finance new residence halls, science buildings, student centers, and athletic facilities through long-term debt. As interest rates have risen, borrowing has become more expensive, and refinancing existing debt has become more challenging for some colleges.
For tuition-dependent institutions, higher debt service combined with declining enrollment can create significant financial pressure.
The "Amenities Arms Race"
One thing families often don't realize is that there was an "amenities arms race" over the last 20–30 years. Many colleges invested heavily in:
New residence halls
Recreation centers
Dining facilities
Student unions
Athletic complexes
Climbing walls
Lazy rivers (yes, some campuses have them!)
Esports facilities
These projects were often financed with debt, on the assumption that enrollment would continue to grow. When enrollment levels off or declines, those debt payments don't disappear.
What Are the Warning Signs?
A college doesn't need to exhibit all of these characteristics to be at risk. However, several together should prompt further investigation.
Heavy Dependence on Tuition and a Small Endowment
Small private colleges without substantial endowments are generally more vulnerable than institutions with diverse revenue sources.
More Than 70% of Students Are Varsity Athletes
In the podcast Future U, higher education consultant Doug Moore (who helps colleges navigate the closing process) notes that colleges where more than 70% of students participate in varsity athletics often face significant financial challenges. Recruiting large numbers of athletes frequently requires deep tuition discounts and expensive athletic facilities, which can strain budgets.
Very High Tuition Discount Rates
Some colleges offer tuition discounts of more than 70% to attract students. While financial aid is wonderful for families, consistently relying on extremely high tuition discounts may indicate that a college is struggling to fill its incoming class.
Frequent Presidential Turnover
Leadership instability can sometimes signal deeper institutional challenges. Doug Moore notes that a president who has been in office for less than a year, particularly following multiple leadership changes, can be a warning sign worth investigating.
High Debt
Many colleges spent heavily over the past twenty years constructing residence halls, recreation centers, and athletic facilities. Debt itself isn't necessarily a problem. Debt combined with declining enrollment is.
Declining Enrollment
Look for multi-year enrollment trends rather than a single year's freshman class. A steadily shrinking student body affects tuition revenue, campus life, housing, and ultimately financial sustainability.
Major Capital Campaigns Without Enrollment Growth
A new science building or residence hall isn't necessarily a concern. But if a college has taken on substantial debt for campus expansion while enrollment has been declining, families should ask questions about how those projects are being financed and whether they align with the institution's long-term strategy.
8. The Enrollment Shift
Higher education isn't simply shrinking. Students are concentrating on a smaller number of colleges. Large flagship universities (especially those in the south) and nationally recognized institutions continue to receive record numbers of applications, while many regional and tuition-dependent colleges are competing for fewer students. This means some colleges are thriving while others face increasing financial pressure.
Questions Families Should Ask
Before committing to any college, consider asking:
Has undergraduate enrollment been stable over the past five years?
What is the college's first-year retention rate?
What is its graduation rate?
What percentage of graduates are employed or enrolled in graduate school within six months?
How large is the endowment?
How dependent is the institution on tuition revenue?
Has the college recently announced layoffs, program eliminations, or budget cuts?
Has the institution merged programs or eliminated majors?
Has leadership changed repeatedly?
One thing to note, many college closures are announced well in advance, and colleges are generally required to put teach-out plans in place so current students can complete their degrees or transfer to partner institutions. While closures can be disruptive, they are not typically overnight events.
How to Research a College's Financial Health
Listen to this episode of the podcast College Uncovered. Many of the indicators discussed above are publicly available.
Families can research:
Enrollment trends here IPEDS - National Center for Education Statistics (NCES)
Endowment size
Graduation and retention rates
College Scorecard
Annual financial statements (often posted on the college's website)
Bond ratings (for those who want to dig deeper)
Local news stories
Strategic plans
Press releases about layoffs or program cuts
Should You Avoid Small Colleges?
Absolutely not. Many small colleges are thriving. In fact, some offer exceptional academics, generous financial aid, close faculty relationships, and remarkable career outcomes. The goal isn't to avoid small colleges. The goal is to be an informed consumer.
Final Thoughts
Choosing a college is one of the largest financial investments many families will ever make.
Beyond rankings and campus beauty, spend a little time understanding the institution's financial health and long-term stability. Most colleges will never close. But asking a few thoughtful questions today can help ensure your student graduates from the college they chose.
The Best College Is the One That Fits
Choosing a college is about much more than rankings or name recognition. It's about finding a place where your student will be challenged academically, supported personally, graduate with manageable debt, and have the opportunities to pursue their goals.
At Mentor Admissions, we help students build thoughtful, balanced college lists that consider academic fit, selectivity, affordability, campus culture, institutional stability, and each student's individual aspirations.
Whether your student dreams of an Ivy League university, a flagship public institution, a liberal arts college, or is still exploring their options, our goal is the same: to help them find the college where they will thrive.
Schedule an initial consultation here, and let's build a college list that reflects your student's goals, strengths, and future.
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