In a report released Wednesday, Fitch Ratings predicted that more colleges will close, merge or significantly restructure operations due to enrollment declines and other market pressures.
Colleges that are already struggling will likely continue to do so, the report forecast.
“The higher education landscape remains bifurcated. Institutions without strong brands that are located in markets with the steepest drop in college-aged population are the most vulnerable to enrollment declines. These markets also often have a multitude of public and private institutions competing vigorously for a shrinking pool of students,” read the report from Fitch.
Given the enrollment challenges at many institutions—which are likely to become more pronounced in the future due to a looming demographic cliff—the ratings agency noted that “revenue growth prospects are relatively limited for now” at small, nonselective private colleges and some public regional universities. Colleges that are tuition dependent are most at risk, the report suggested.
Other operating pressures, such as wage growth and the rising costs of energy, are also highlighted. Those pressures are driving revenue margins down, the report said, prompting some colleges to introduce cost-cutting measures, including reducing programs and staff, drawing down financial reserves, or selling off assets to provide an influx of funds.
The report did not predict the number of colleges that would close or merge in the coming years.
This year has already brought a slate of closures, including Alderson Broaddus University, Alliance University, Cabrini University, Cardinal Stritch University, Finlandia University, Hodges University, Holy Names University, Iowa Wesleyan University, Medaille University and Presentation College.
Moody’s Investors Service offered a similar outlook on college closures in June.