In the past few years, a troubling trend has emerged, a growing number of colleges have closed. This can in part due to a consistent decline in college enrollment, which, while gradual, has been outpaced by the number of schools closing their doors.
The result of these closures has created a shift higher education contributing to higher student loan debt. Learn how the reduction in the number of colleges has increased demand for the remaining schools, subsequently driving up costs and adding fuel to the fire currently known as the student loan debt crisis.
The Rise in College Closures
Statistics indicate that the number of colleges closing their doors has increased markedly in recent years. This trend shows no signs of slowing, with more institutions announcing closures. In 2024 schools are closing at a pace of 1 per week so far.
Reasons for College Closures
Several interrelated factors may be contributing to the rising number of college closures:
- Financial Instability: Many colleges, particularly smaller institutions and private colleges, face significant financial challenges. Decreased revenue from tuition and donations, coupled with rising costs, make it difficult to maintain financial viability.
- Declining Enrollment Numbers: A consistent decline in college enrollments exacerbates financial issues. According to the Education Data Initiative, postsecondary enrollments have been declining annually, with a 4.9% drop in enrollment in from 2019 to 2021. Fewer students mean reduced tuition income, which is critical for many institutions' budgets. While we have seen enrollment increases in recent terms , there is concern enrollment will decrease in the upcoming months due to the FAFSA fiasco.
- Increased Operational Costs: The cost of operating a college has increased due to a variety of factors, including rising salaries, healthcare costs, and the need to invest in technology and infrastructure. These escalating expenses put additional pressure on institutions already struggling with tight budgets.
- Changes in Government Funding and Policies: Shifts in government funding priorities and policies can also impact college closures. Reduced state funding for public colleges and changes in federal financial aid policies can lead to budget shortfalls, forcing some institutions to close.
More on the Decline in College Enrollment
When enrollment fell by approximately 5% from 2019 to 2021, it represented the biggest drop since 1951 – 70 years! This downward trajectory has been particularly pronounced in the undergraduate sector, with consistent annual decreases. The decline is not uniform across all types of institutions, with community colleges experiencing more significant losses compared to four-year universities.
Factors Contributing to Declining Enrollments
Several key factors have contributed to the declining enrollments observed in higher education:
- Demographic Shifts: One of the primary drivers behind the reduction in college enrollments is demographic change. The number of high school graduates has been decreasing in many parts of the United States, leading to a smaller pool of potential college applicants. Shifts in population growth rates and aging demographics also mean fewer young people are entering the traditional college age bracket.
- Increased Interest in Alternative Education Paths: There has been a growing interest in alternative education paths that do not involve traditional four-year colleges. Trade schools, vocational training programs, and online courses offer appealing options for students seeking practical skills and immediate employment opportunities. These alternatives often come at a lower cost and with shorter time commitments, making them attractive in a changing job market.
- Economic Factors: Economic factors also play a significant role in enrollment trends. During recessions or periods of economic uncertainty, prospective students may delay or forgo college enrollment due to financial constraints or the immediate availability of jobs. Economic downturns can also impact family finances, making college less accessible due to higher tuition costs.
Demand has Grown within Remaining Colleges
As the number of colleges decreases, the demand for those still in operation has surged, leading to a range of financial and logistical implications for students and schools alike. This increased demand significantly impacts admissions processes, tuition rates, and student loan debt levels.
Impact on Admissions: Higher Competition and Lower Acceptance Rates
With fewer colleges available, competition for admission to the remaining schools has intensified. Prospective students face more rigorous application processes and lower acceptance rates as competition heightens. For example, prestigious universities and well-regarded private institutions have seen their acceptance rates plummet. Harvard University, for instance, reported an acceptance rate of just 3.4% for the class of 2025, reflecting this trend of heightened competition.
Increase in Tuition and Fees
To capitalize on the higher demand for enrollment, many colleges have increased their tuition and fees. By raising costs, these institutions can generate additional revenue to cover rising operational expenses and invest in campus improvements. For instance, tuition at private four-year institutions rose from an average of $32,770 in the 2011-2012 academic year to $38,070 in 2020-2021, according to the College Board. Similarly, public four-year in-state tuition saw a notable uptick.
Increased Tuition and Growing Student Loan Debt The surge in tuition has a direct correlation with the escalation in student loan debt levels. As higher education costs increase, more students and families rely on loans to finance their college experiences. According to the Federal Reserve , student loan debt in the United States reached more than $1.7 trillion in 2021, showcasing a dramatic rise over the past decade. This debt burden can have long-term repercussions, affecting graduates' financial stability and career choices.
Statistical Data on Tuition Hikes and Student Debt Levels
Statistical data underscores these rising trends. The College Board reports that average tuition and fees at public four-year institutions have risen by about 17% between the 2011-2012 and 2020-2021 academic years. Concurrently, the average federal student loan debt per borrower increased 50% from around $24,760 in 2012 to over $37,110 in 2021, according to the Education Data Initiative.
The closure of colleges over the years has directly impacted student loan debt. With fewer schools, there is less supply but more demand. This leads to higher tuition costs, which in turn causes students to take on more debt. Understanding this situation can help you best plan for how you will pay for school.
One of the best ways to reduce costs is to apply for and win scholarships. Did you know you can win scholarship money up through graduation. So don’t stop looking for that free money that can be used to minimize cost increases due to school closures and increased demand.