Nearly 80 US colleges may face closure within 5 years, even as Ivy League schools see enrollment surge: Philadelphia Fed research shows – Times of India

A Looming Crisis: As elite Ivy League and Ivy-equivalent institutions experience record-breaking application surges, a starkly contrasting crisis looms over many smaller colleges and universities across the United States. A recent report by the Federal Reserve Bank of Philadelphia warns that as many as 80 colleges may close their doors within the next five years, underscoring a brewing crisis fueled by shifting demographics, financial pressures, and changing perceptions about the value of higher education.

The “Demographic Cliff” and Enrollment Declines

At the heart of the Federal Reserve Bank’s findings lies the “demographic cliff,” a term used to describe a projected sharp decline in the number of college-age students. This demographic shift, set to intensify in the coming years, is one of the primary drivers of an expected rise in college closures. In a worst-case scenario, the report predicts as many as 80 additional closures annually, representing a 142% increase from recent averages. Even under less severe conditions, gradual enrollment declines are expected to push closure rates up by 8.1% annually.
Enrollment in U.S. colleges has already been falling for years, exacerbated by the rising cost of tuition and growing skepticism about the return on investment for a degree. Between 2025 and 2029, a 15% enrollment decline is projected, a trend that the report attributes to demographic changes and financial pressures. While prestigious institutions are thriving, smaller colleges with fewer resources are struggling to adapt to these realities.

Financial Distress: A Common Thread

Financial challenges are a major factor driving closures, as the Federal Reserve Bank’s report highlights. Many institutions are operating with persistently negative margins, unable to cover rising operational costs with stagnant or falling revenues. The report’s analysis of historical data between 2002 and 2023 revealed that 84 of the 100 riskiest institutions it assessed closed within just three years. Among the key indicators of financial distress are low faculty salaries, smaller endowments, and an overreliance on tuition revenue—a precarious position as enrollment numbers continue to decline.
External economic pressures further compound these challenges. For example, budget cuts and financial exigency declarations have forced even flagship public universities to reduce academic programs and lay off staff. The ripple effects of such austerity measures underscore the systemic nature of the financial strain facing higher education.

Colleges Most At Risk Of Closure

Certain types of colleges are particularly at risk. Historically Black Colleges and Universities (HBCUs) and women’s colleges, which often operate with smaller endowments and narrower applicant pools, face a disproportionate threat of closure. Conversely, urban institutions tend to have a lower risk, benefiting from location advantages that attract more students.
Adding to the challenge is a lack of comprehensive data for monitoring at-risk institutions. Many colleges that ultimately close provide incomplete or outdated financial and operational data, making it harder to predict and address vulnerabilities proactively.

The Pandemic’s Accelerating Effect

While the pandemic is not the root cause of these issues, it has acted as a catalyst. Many of the current challenges—rising tuition, declining enrollment, and doubts about the value of a college degree—predate COVID-19. However, the pandemic magnified these trends, forcing colleges to confront financial shortfalls and accelerating closures that might have otherwise unfolded over a longer period.

A Tale of Two Realities

In stark contrast to struggling institutions, elite colleges and universities are thriving. Ivy League schools, along with “Ivy-Plus” institutions like Stanford, MIT, and Duke, are reporting unprecedented increases in applications.
According to a Common Application report, overall applications for the 2024-25 academic year rose by 10% compared to the previous year. These schools are also attracting students with robust financial aid programs, offering full tuition to many of the most promising applicants from low- and moderate-income backgrounds. For instance, eight prestigious universities, including Yale, Brown, and NYU, now charge over $90,000 annually for tuition and fees, yet their enhanced aid packages continue to draw record numbers of applicants.

Shifting Student Preferences and Impact on local communities

As the cost of attending college climbs to nearly six figures at some institutions, students from low- and middle-income families are increasingly opting for less expensive public universities or four-year trade schools. According to CNBC, this shift reflects growing concerns about affordability and a desire for greater value from postsecondary education.
The closure of colleges has profound implications, especially for local communities. Colleges often serve as major employers and cultural hubs. Their loss can devastate small towns and cities, leading to job losses and economic decline. At a national level, widespread closures could further strain the higher education system, reducing access for underserved populations and exacerbating socioeconomic divides.