How Are Colleges Going Out of Business?

Blogging Time

86 colleges have shut down or ended up merging with others over the span of three years. The 2019-2020 school year alone witnessed at least 53 colleges closing indefinitely, all due to falling enrollment. With undergraduate enrollment falling by almost 8% between 2019 and 2021, the largest two-year drop in the last fifty years, this raises the question: why is college enrollment experiencing a significant decline?

Factors such as the rising cost of education, a lower return on investment by getting a college degree, a drop in overall interest in going to college, and a decreasing candidate pool all contribute to the falling enrollment rates. Increasing education costs that are outpacing inflation rates and family income growth have caused several students to forgo college or contribute to a decrease in interest in going to a four-year college. It also doesn’t help that 73% of people with a college degree have a job that is not related to their field of study in college. Many are predicting that between 2025 and 2029, college enrollments will fall by more than 15% because there will be less people of college age available.

Financial issues caused by the pandemic have contributed to the declining college enrollment as well. Many U.S. college students have admitted that they couldn’t afford their tuition due to the impact of COVID-19. This has led to many undergraduates deciding to drop out or unenroll in favor of finding full-time employment. In fact, almost 40% of parents had no choice but to use their child’s college fund to pay off bills during the pandemic.

The financial strain caused by COVID-19 has caused several high schoolers to change their plans after graduation. These days 15% of students decide to go to a public rather than a private college while 36% of students choose to attend a community college, an increase from 28% before the pandemic. Another 27% plan to take a gap year in order to save enough money to go to college in the future.

In the last three years, community college enrollment dropped 15%. However, highly selective or prestigious colleges experienced an increase in enrollment by a little over 3%, bringing them to almost the same enrollment rates as before the pandemic. Schools that had 30,000 or more attendees experienced less struggle with enrollment rates compared to schools with 5,000 or less attendees as well.

In this way, Ivy Leagues and other similar schools have a competitive advantage. People tend to choose to go to one of these schools due to their degrees being considered more valuable than public or community college degrees. Prestigious and selective colleges are able to get large endowments, or financial assets gained from generous donations, that can be used to attract more students and pay for college programs and general operations. However, only around 106 universities have endowments that amount to more than $1 billion.

With falling enrollment rates causing colleges to go out of business at any moment, this can cause many to worry whether the college they chose will stay open until their graduation. Thankfully, there are ways for people to analyze the financial health of their chosen college before fully committing. Information from endowment reports and news reports are available to the public online. Asking about a school’s tuition discount can be beneficial to your decision as well.

Even if your college does close while you’re still attending, there are still things you can do to not lose too much in the process. Your college might sign transfer agreements when they shut down with nearby universities that will help students complete their degrees. Doing some research can help you learn about federal loan discharge options or if you qualify for payment refunds or garnished wages.

With the current fall in enrollments straining the success of colleges, it is important to wisely choose the college you plan on going to.

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I live and work in Utah, so my news will focus on this state. I am also very into finance, entrepreneurship, crypto, and small business. I'm an owner of several businesses, from a solar farm to a sports card shop. I write about my experiences running them.

American Fork, UT

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