Class dismissed: Colleges expected to close as enrollment numbers tank

It’s no big secret that the cost of attending a four-year college or university in the United States is out of control. It’s almost gravity defying how the cost of college has increased relative to regular inflation over the past twenty years. In fact, more than 500 nonprofit private colleges have shut down in the last decade according to the Wall Street Journal, which was "three times what it was in the decade prior."

The news is about to get worse, and there is a stern warning announcement coming from the pilot in the cockpit. 2025 is going to have a lot of turbulence followed by potentially weekly plane crashes of colleges and universities who can no longer afford to open their doors. This new reality is the ultimate law of supply and demand and families in America are voting with their feet.

LOW ENROLLMENT AND FINANCIAL STRUGGLES FORCE A NY COLLEGE TO CLOSE: ‘IT’S REALLY UNFAIR TO EVERYONE'

WHY ARE COLLEGES CLOSING AT SUCH A RAPID RATE?

 Enrollment

Trend experts have new terminology they call the "enrollment cliff." The number of students enrolled in degree-granting colleges and universities fell by 15% from 2010 to 2021 and only 62% of high school seniors in the U.S. immediately go on to college right now.

That’s a stark contrast to almost fifteen years ago when the number was 68% in 2010, according to government data. Many of the students who opt out of a postsecondary education are low-income students, but even those with means are beginning to choose alternatives. We’ve also seen a spike in the competition for state colleges and universities where parents can enjoy in-state tuition and other possible grant programs offered for only in-state students.

Beyond the fact that some students are taking certification courses versus going to college, some are entering the workplace and some are considering alternative career paths, we are experiencing a record low number of new babies in the United States which will have a long-term impact on the shrinking enrollment for colleges and universities.

This trend of low birth rates began roughly 17 years ago. After hitting an all-time high in 2007, the Great Recession hit in 2008 causing fertility rates to plummet.  The national birth rate fell 23% between 2007 and 2022, and fast-forward to the present day, it isn’t apparent that generation Z twenty-somethings are itching to get a family going. This decline in the overall birth rate is why beginning next year in 2025, and lasting until 2037, we are going to see a major decline in enrollment as 2008 babies begin to reach college age.

It’s not the money… It’s the money

Thirty plus years of providing financial advice for families across America and the number one complaint in the planning process isn’t about how much money someone is going to need to retire. The dialogue quickly shifts to how it’s going to be possible to put two, three, or even four kids through a four-year college education.

Colleges and universities are starting to feel the financial pain.

Even though these higher institutions don’t pay federal income tax or pay real estate taxes, the higher overall operating costs of having a five-star operation and state-imposed restrictions on tuition increases for public colleges have limited colleges and universities' ability to increase tuition revenue. Couple that with the overall market where families are voting with their feet to attend lower-cost colleges and universities, it has put a heavy strain on the ability of these institutions to remain fiscally solvent.

While there are more than 150 colleges and universities boasting more than $1 billion dollars in endowment money, there’s a slew of others that are battling for enrollment, fighting for keeping academic talent and pondering how to keep facilities at a level that new college students have grown to expect from a school.

This not only can affect the school itself, but the surrounding towns or cities where local business is built around the school. On average, each college or university that shuts down affects 265 jobs and $14 million dollars of labor income. To keep their head above water, some colleges have cut faculty and slashed areas of academic study, but it won’t be enough to face the Titanic-like cold water that many universities and colleges are about to face.

Alternative Career Paths

Under DOGE we may eventually see the Department of Education eliminated.  And with the possibility of Pete Hegseth becoming the new Secretary of Defense, we may see a new pitch to young people about joining the United States military.

We don’t yet what the future of education will look like in the United States, but it’s quite possible that teenagers in high school will have four potential career paths in the future.

1. College or university

2. Vocational school

3. Entrepreneurship

4. Military

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It’s now harder to find blue-collar workers than white-collar workers, reversing a decades-long trend in the U.S. job market. Take plumbers as an example. It’s expected by 2027 that the United States will be short some 550,000 plumbers, which is bad news for the cost to get plumbing fixed and the time it will take to find someone to fix it. These kinds of statistics are universal across all lines of home services blue collar workers.

There are great careers in the military as well and military enlistment has been steadily down over the past 40 years. At the end of the 2023 fiscal year (September 2023), three branches reported falling short of their recruitment goals: the Navy was at 80% of its target number, the Army was at 77% and the Air Force was at 89%. The Marine Corps and Space Force were the only branches to meet their recruitment goals.

The total number of active-duty service members in the US armed forces declined roughly 6% from 2012 to 2022, from 1.4 million to 1.3 million. We are going to need more young people to join the military over the next 10 years.

Closures are coming

The cost of tuition and fees plus room and board for a four-year private college averaged $58,600 in the 2024-2025 school year. With inflation, that’s roughly $250,000 to get one child through a four-year college education. If parents and students continue to question the hefty price tag of a college education, we could see enrollment fall to record lows over the next decade and more colleges close their doors and shut down their operations. Class is not in session!