The demographic cliff may reorient the higher education landscape and propel the number of college closures in the coming decade. A new working paper from the National Bureau of Economic Research predicts just how many institutions may become victims.
Researchers Robert J. Kelchen, Dubravka Ritter and Douglas A. Webber compiled scores of institutional data from over 8,000 institutions across two decades into a machine learning algorithm to forecast how many institutions are at risk of closure if, as expected, the pool of young college applicants begins to dry up next year.
If, in the worst-case scenario, the demographic cliff wipes 15% of student enrollment between 2025 and ’29, some 80 colleges could end up closing, or about 4.6 a year. In total, the phenomenon could affect over 100,000 students and nearly 21,000 staff.
While many of the colleges at risk represent an average student body of less than 1,500, they are usually tied to the region’s economic centers, the researcher stated. “Some institutions can be considered significant employers even in small and medium-size communities, and often act as anchor institutions in those communities.”
The colleges most likely to close are in the private sector. Between 1996 and 2023, the closure rate for two-year and four-year public institutions was 0.2% and 2.7%, respectively. On the other hand, 7.1% of private nonprofit four-year colleges (and 21.1% of for-profit 4-year schools) during that period. Public institutions facing financial distress are most likely to merge or consolidate, researchers added. One such example is Vermont State University.
Whether or not the demographic cliff materializes, higher ed could still experience at least one college close a year if 2019 enrollment trends continue.
Researchers studied everything from an institution’s enrollment, endowment, total staff, debt and other metrics to inform its predictive tool. Fifty-two of the 100 institutions that it identified as the riskiest institutions in higher education closed within three years. However, it had missed the mark on the now-defunct Birmingham-Southern, Iowa Wesleyan and the University of the Arts.
“While our predictive models of college financial distress and closure may not be able to accurately predict the eventual failure of each individual institution,” the paper read, “they are certainly effective at capturing the riskiest institutions.”
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