A new report from Moody’s Investors Service finds that college closures, while remaining rare, “will continue to accelerate gradually” as the higher education sector navigates financial challenges.
The report, released last week, notes that distressed institutions are expected to try various approaches to stave off closures—including declaring financial exigency, which allows for cost-cutting opportunities—often depleting assets in the process with no guarantee of remaining open. The report states that “most troubled colleges will continue to operate as long as possible” and notes that predicting college closures is difficult due to potential outside funding from donors and states.
Small private colleges with enrollment struggles are “most vulnerable to closure,” Moody’s finds. While the report indicates that more public institutions will merge or consolidate, it does not offer a prediction on how many will go out of business.
Moody’s also released two additional reports last week (found here and here). They noted that public colleges and universities had a “solid” fiscal 2022, thanks largely to federal COVID-19 funds and state support. But with the spigot of federal coronavirus aid turned off, their operating performance is expected to weaken, especially given increased inflationary pressures through fiscal 2023. Smaller institutions, particularly those with low brand recognition, are likely to remain much more stressed than larger ones, Moody’s reported.