Report Finds Higher Ed Sector Shrank by 2 Percent

Amid waves of college closures, a new report from the National Center for Education Statistics released Wednesday found that the number of higher education institutions eligible for federal financial aid shrank by 1.7 percent in the 2023–24 academic year compared to the prior year.

The report noted that the number of Title IV institutions—those eligible to participate in federal financial aid programs—fell from 5,918 in the 2022–23 academic year to 5,819 in the 2023–24 academic year, a net loss of 99 colleges and universities.

The Findings

While the NCES report illuminated the decline, it did not specify how the sector contracted, making no mention of recent closures or mergers to explain what happened to the institutions that are now defunct.

The report also failed to note that the shrinkage would have been higher without the addition of new institutions.

Data shared separately with Inside Higher Ed by the U.S. Department of Education show that 161 institutions either closed, merged or otherwise lost Title IV status. At the same time, 62 institutions were added in the 2023–24 academic year, bringing the total net loss to 99 colleges and universities.

According to the ED’s data, 73 institutions closed, 17 merged and 71 lost Title IV eligibility. Among those institutions, 54 were in the for-profit sector.

While there were familiar names among the closures and mergers—including Holy Names University, Iowa Wesleyan University, Cazenovia College and other four-year nonprofits whose shutdowns Inside Higher Ed has covered—many were small for-profit, vocational colleges.

The only part of the higher education sector that expanded was public four-year institutions, according to the report. That increase was driven by two-year institutions converting to four-year status; in all, 16 institutions made that leap, the NCES report found.

Of the 5,819 remaining colleges and universities eligible to participate in federal financial aid programs, 2,691 were classified as four-year institutions, 1,496 as two-year institutions and 1,632 were “less-than-two-year institutions,” which typically focus on occupational credentials.

The study also highlighted a number of other findings, including:

• Tuition and fees for full-time, first-time degree- or certificate-seeking undergraduates, adjusted for inflation, decreased across all sectors between the 2022–23 and 2023–24 academic years. Tuition and fees were reportedly down 7 percent for in-state students and 8 percent for out-of-state students at public four-year institutions. For private nonprofit institutions, that figure was down 5 percent, while at private, for-profit institutions, it fell 8 percent.
• Of the roughly 3.6 million students receiving degrees or certificates at four-year, degree-granting institutions eligible for federal financial aid, 2.2 million were enrolled in public institutions; 1.1 million at private, nonprofit institutions; and another 246,000 at private, for-profit institutions.

The Outlook

The shrinkage of higher education noted in the report comes as no surprise to experts in a sector that has been battered in recent years by rising operating costs and a dim demographic outlook stymied by falling birth rates and growing skepticism of the value of a degree. And they believe further contraction is on the horizon.

“We’re likely to continue to see closures in the coming years, especially as financially struggling colleges cope with falling enrollment and the expiration of pandemic-connected relief funds,” Clare McCann, director of higher education at Arnold Ventures, a philanthropic group, wrote to Inside Higher Ed by email. “We need to make sure those closures are thoughtful and smart so that students and taxpayers aren’t left holding the bag for precipitous collapses.”

Mark DeFusco, a senior consultant with Higher Ed Consolidation Solutions, called the 2 percent sector decrease “alarming” though not surprising given current demographic challenges.

But DeFusco emphasized that the pain of the contracting industry is not being felt equally: While highly selective institutions and those with national brands will be fine, “middling colleges,” which make up the bulk of the sector, will continue to face increased enrollment challenges and potential for closure.

DeFusco also expressed concern about the downward trend in tuition.

The “tuition decrease is also startling (and we shall not know the total extent because the actual cost of attendance takes time for analysis). This is what happens in a buyer’s market,” DeFusco wrote in an email. “Deflation is more bad news for colleges. We are already seeing discount rates skyrocketing, and these discounts used to be to squeeze additional margin into already filled classes.”

Adding five low-paying students to a class of 15 is a net gain because the institution is already offering the class, he noted. But “discounting simply to make a class of 15 leaves very little margin,” he said.