The number of colleges that close each year is poised to significantly increase as schools contend with a slowdown in prospective students. That’s the finding of a new working paper published by the Federal Reserve Bank of Philadelphia, where researchers created predictive models of schools’ financial distress using metrics like enrollment and staffing patterns, sources of revenue and liquidity data. They overlayed those models with simulations to estimate the likely increase of future closures.
Under the worst-case scenario which assumes a one-time 15% drop in prospective students — known as the “demographic cliff” — 80 additional colleges would shut, impacting more than 100,000 students and 20,880 staff members. If that student decline was spread out over five years, annual closures would tick up by 4.6 schools, the report shows.
Also Read: US varsities urge international students to return from winter break by Jan 20 “These simulations point to the precarious potential situation facing postsecondary education in the coming years, especially if the demographic cliff materializes in a moderate to severe fashion,” according to the report, authored by Robert Kelchen, a professor at the University of Tennessee and a visiting scholar at the Federal Reserve Bank of Philadelphia, along with Dubravka Ritter and Douglas Webber, Fed researchers. “While some of these estimated increases might seem small at the national level, they would be significant for the handful.