Demographics could trigger closures of US universities – study

Financial distress resulting from changing demographics and other factors is likely to cause many US colleges to close over the coming years, research from the Federal Reserve Bank of Philadelphia suggests.

The study, by Robert Kelchen, Dubravka Ritter and Douglas Webber finds the post-pandemic recovery in the US economy and longer-term trends are creating significant headwinds for the education sector.

A declining number of people are graduating from high school, the researchers argue. Moreover, the US public may be growing more sceptical about the value of higher education. Student enrolment in universities fell by 15% from 2010 to 2021 in the US, the report finds. The share of high school graduates enrolling in universities and colleges is also declining.

There have also been substantial declines in recent decades in the numbers of adult learners. “The number of students over the age of 25 has fallen by nearly half since the Great Recession,” say the authors.

The paper estimates university enrolment could drop by 15% between 2025 and 2029.

The authors’ models project that, under a worst-case scenario in terms of demographics, a significant decline in the number of enrolled students in a single year would result in the closure of an additional 80 colleges and universities that year – over and above the forecast closures based on current downward enrolment trends. A more gradual decline in enrolled students would lead to an additional 4.6 closures, or 23 additional closures over five years.

If the current levels of financial distress in colleges and universities experienced since 2019 were to continue, they write, additional institutions would close each year.

The authors argue that universities serve as the anchors of local economies, and their closure can have a profound impact on the surrounding area. The resulting increase in unemployment could lead to further job losses in an area’s retail, healthcare and food services sectors.

The authors highlight the robustness of their findings by applying their model retrospectively to historical data for colleges and universities. The model ‘predicted’ that 100 institutions had the highest probability of closure. Of these, 84 had in fact closed within three years of when the data was reported.

Correction, December 18, 2024: This article has been amended to reflect the number of closures that would result from a significant drop in enrolments over both a one- and a five-year horizon; and the number of closures resulting from financial stress remaining at the levels seen since 2019