With cliff looming, private colleges’ finances pose a challenge

With pandemic-era federal stimulus money drying up, the dust is beginning to settle on private colleges’ and universities’ balance sheets. And as the demographic cliff closes in, threatening to wreak havoc starting in 2026, students should be all the wiser on which schools are in good financial health before they park their money.

That’s how Forbes frames its latest analysis of nearly 900 private colleges’ finances in which more than half of all schools earned a C or worse, compared to the 20% that did so in 2021.

Despite the boosts some institutions received in the last three years from emergency funding, colleges have more or less returned to where they stood in 2019 and early 2020, Susan Shaffer, vice president and senior credit officer at the ratings agency Moody’s, told Forbes. “That period where federal funds were coming in and offsetting some of the pandemic financial pressures was artificially covering up some of the challenges that a certain part of the sector were facing,”

As a result, 58% of private colleges don’t have a long-term financial solution that isn’t wholly dependent on their year-to-year tuition dollars—a poor asset to depend on as the number of high school students drops.

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Here is a breakdown of how many colleges scored in each grade range:

• A+: 27
• A: 27
• A-: 28
• B+: 50
• B: 46
• B-: 102
• C+: 127
• C: 161
• C-: 139
• D: 169

Forbes’ analysts built their report using the latest available data from the National Center for Education Statistics. A private college had to have enrolled at least 500 full-time students to be considered. Endowment assets per FTE was the most important determinant in a college’s long-term financial health, per Forbes. 

Click here to read more about the methodology. 

Schools scoring above an A+ in financial health