EY-Parthenon report cited in Forbes
In the article “Will half of all colleges really close in the next decade?” Forbes highlights the prediction that 50% of colleges and universities will close or go bankrupt in the next 10 years.
The prediction arose out of an observation that the business model of traditional colleges and universities was broken, with many colleges and universities being increasingly unable to bring in enough revenue to cover their costs. Plus, schools are dealing with fierce competition to attract students, and those with enrollment declines can struggle with large fixed costs.
The article notes that the biggest vulnerability in higher education is likely in the vast number of small institutions, particularly those located in rural areas in the Northeast and Midwest where the biggest declines of students are slated to occur. It cites the EY-Parthenon report, Strength in numbers: Higher education collaboration, which highlights “77% of colleges and universities—or 738 institutions—with fewer than 1,000 students exhibited at least three risk factors, such as a high discount rate, being dependent on tuition for more than 85 percent of revenue, or having an endowment that covers less than a third of expenses, that placed its survival in question.”