University Closures Rise as Federal Support Shrinks and Enrolment Falls

Higher Education Crisis: Enrolment Drops and Budget Cuts Hit U.S. Colleges

Universities across the United States are grappling with severe financial pressures. In response to declining student enrollment and reduced federal support, many institutions have resorted to cost-cutting measures, mergers, and shared services in areas such as energy, IT, and health insurance. In some cases, financial instability has led to full closures. Between 2010 and 2021, student enrollment in U.S. higher education fell by 15%, largely due to a shrinking college-age population. This downward trend has been exacerbated by federal funding cuts, staffing reductions at the Department of Education, and policy changes introduced under the Trump administration, including increased taxes on university endowments and stricter regulations for international students.

Amid these challenges, universities are increasingly collaborating to maintain financial stability. Thomas P. Foley, president of the Association of Independent Colleges and Universities of Pennsylvania (AICUP), noted that member institutions are working together to keep tuition competitive through 39 cost-saving initiatives. These efforts, spanning technology, finance, human resources, and research, are saving tens of millions annually by pooling resources for insurance, software, energy, and retirement schemes. AICUP includes prominent universities such as Carnegie Mellon and the University of Pennsylvania, alongside smaller private colleges like Haverford and Swarthmore. According to Foley, most member institutions receive little to no direct federal or state funding and instead rely heavily on student aid, including Pell Grants, due to their high proportion of financially dependent and minority students.

Lincoln University, a historically Black institution, is under considerable financial strain, with 25% of its budget dependent on state funding amid delays in budget approval. President Brenda Allen expressed concern over reduced federal staffing, which has disrupted financial aid processing, critical for the 98% of Lincoln students who rely on such support. While avoiding staff layoffs, the university is actively cutting costs and adjusting operations to manage cash flow. Closures and mergers are becoming increasingly common across Pennsylvania. Since 2016, ten institutions have either shut down or merged, according to Higher Ed Dive. In 2024 alone, three universities, the University of the Arts, Pittsburgh Technical College, and Clarks Summit University, closed due to low enrollment and financial instability.

Others have opted to merge. Rosemont College announced a merger with Villanova University in March, followed by Lackawanna College’s merger with Pierce College in June, citing aligned academic offerings and Pierce’s strong online presence. In July, the federal government approved Drexel University’s merger with Salus University. A Drexel spokesperson described the move as strategic, combining Salus’s specialised health programmes with Drexel’s broader academic and research strengths. Cost-cutting efforts continue across the state. In May, Penn State approved the closure of seven campuses by the end of the 2026–27 academic year, citing a 30% drop in enrollment, financial pressures, and demographic shifts. The university will retain 13 campuses and has already reduced staff and adjusted its budget.

In July, Temple University announced 190 job cuts, including around 50 layoffs, to reduce a £60 million deficit to £27 million. President John Fry attributed the financial strain to a 10,000-student enrolment decline since 2017, which resulted in a £200 million revenue loss. He also flagged upcoming changes to federal loan and grant programmes as further concerns. A 2024 report from the Federal Reserve Bank of Philadelphia warned that university closures and financial instability could significantly impact local economies, particularly in regions where universities serve as major employers and community anchors. In Philadelphia, institutions such as Drexel, Temple, the University of Pennsylvania, and Jefferson University are central to the city’s economy, especially through their healthcare systems and employment networks.

In response to these growing concerns, Governor Josh Shapiro has called for a strategic rethink of higher education in Pennsylvania. The state has since established a new Board of Higher Education to support and strengthen the sector. As part of his proposed 2025–26 budget, Governor Shapiro has earmarked £13 million for community colleges, £40 million for state-owned universities, and £60 million in performance-based funding for state-related institutions, including Lincoln University, Penn State, the University of Pittsburgh, and Temple University.

A 2022 report by the Federal Reserve Bank of Philadelphia highlighted that higher education and healthcare together contribute approximately £1.7 trillion to the U.S. economy and support 18 million jobs, representing around 9% of the national workforce. Higher education alone accounts for £700 billion, with 25 million students and 3 million employees. Looking ahead, Emily Wadhwani of Fitch Ratings predicted continued mergers, restructurings, and closures across U.S. universities, citing stagnant public funding, limited tuition growth, rising labour and capital costs, and an uncertain policy landscape as key financial pressures.

Despite growing scepticism about the value of higher education, Thomas P. Foley maintained that a university degree remains highly beneficial, pointing to an estimated £1 million in additional lifetime earnings and the development of critical thinking skills, particularly relevant for emerging fields such as artificial intelligence. Brenda Allen also emphasised the role of education in promoting social mobility, reaffirming Lincoln University’s mission to help students advance economically. She noted that the university is intensifying efforts to communicate this message more widely. While U.S. universities face mounting financial and demographic pressures, strategic collaboration and targeted public investment remain essential to safeguarding their economic and societal contributions.

Editor’s Note:

Colleges and universities in the U.S. are going through tough financial times. With fewer students signing up and less money from the federal government, many schools, especially in Pennsylvania, are being forced to shut down campuses, merge with other institutions, or make big budget cuts. Universities are under growing pressure from falling student numbers, flat government funding, and changing policies. Big schools like Penn State and Temple are already making major changes. Governor Shapiro’s plan to improve higher education in Pennsylvania is a good start, but more support is needed from the federal government, especially more staff in the Department of Education and fairer funding for colleges that serve minority students.

Skkobuzz asserts that as more people question whether college is worth it, it’s important to remember how higher education helps the country grow. It supports the economy, encourages new ideas, and gives people a chance to move up in life. As leaders like Thomas P. Foley and Brenda Allen have pointed out, saving our universities is about more than keeping them open; it’s about protecting the future of the nation.