Stanford will be in fine financial shape, this century and next, I suspect. Same with other elite American private universities, large research universities and public universities. Smaller, less prominent private universities are substantially at risk over the next generation.
Right now, there are 2,488 four-year colleges and universities in America. 25 years ago, the NCES counted 2,450 four-year degree-granting institutions in 2000–01: 622 public and 1,828 private.
So the number hasn't changed much, though the makeup has. Today, 716 are public, 1,488 are private/non-profit, and 284 are private/for profit. I suspect that in another 25 years, we'll be down to 2,000 colleges and universities, more or less. We'll lose 500, mostly from the private/nonprofit sector.
There are five issues, I think:
1. The demographic cliff has arrived. WICHE projects the number of American HS students will decline about 13% between the 2025 peak and 2041, primarily because fewer children were born after the Great Recession. WICHE
2. The pricing model is showing significant stress. At private nonprofit colleges, the average institutional tuition discount for first-time, full-time undergraduates is now about 57% for 2025–26. In other words, colleges are effectively giving back more than half of their published tuition price through institutional grants in order to attract students. NACUBO So, roughly 90% of first-year students at the private institutions participating in NACUBO's study receive institutional grant aid.
3. College is expensive, but tuition itself hasn't simply risen relentlessly in real terms recently. NCES data show average public four-year in-state tuition of about $9,000 in 2024–25, and after adjusting for inflation that figure was actually below its level a decade earlier. The bigger affordability problem includes housing, food, fees and other living costs—not merely tuition. National Center for Education Statistics
4. The financial pain will be highly unequal. A Harvard, Stanford or Princeton can draw nationally and internationally and has enormous financial resources. A small regional college with 1,500 students, modest endowment, limited pricing power and heavy reliance on tuition has much less room to maneuver. NACUBO explicitly warns that escalating tuition discounts can create greater financial stress for tuition-dependent private institutions.
5. Small endowments. Personally, I think a $1 billion+ endowment will help stave off financial ruin. Only 89 schools have $1 billion endowments or more, ranging from Harvard down to SCU ($1.67 bils.) and Fordham ($1.05 billion).
Lastly, I think state schools will fall under pressure, particularly as the states have to accommodate aging populations. Here's California's percentage of the budget dedicated to post-high school education compared with retirement payments:
Fiscal year Higher education Retirement*
1985-86 ~15.0% ~3.6%
1995-96 ~11.7% ~3.9%
2005-06 ~11.4% ~4.1%
2015-16 ~12.3% ~6.0%
2025-26 ~10.0% ~6.1%
* Doesn't include city, county or other non-state based retiree payments
Other California costs rising most quickly as a percentage of the overall budget:
1. Health care / Medi-Cal, double the percentage (from 10.5% to 20% of General fund spending in that time).
2. K-12 education grew from about 20% to 36%. Thanks to Prop 98 (1988), which materially changed the structure of the budget.
3. Public employee pensions and health benefits.
4. Corrections and prisons.
5. Health and human services beyond Medi-Cal.
Right now, there are 2,488 four-year colleges and universities in America. 25 years ago, the NCES counted 2,450 four-year degree-granting institutions in 2000–01: 622 public and 1,828 private.
So the number hasn't changed much, though the makeup has. Today, 716 are public, 1,488 are private/non-profit, and 284 are private/for profit. I suspect that in another 25 years, we'll be down to 2,000 colleges and universities, more or less. We'll lose 500, mostly from the private/nonprofit sector.
There are five issues, I think:
1. The demographic cliff has arrived. WICHE projects the number of American HS students will decline about 13% between the 2025 peak and 2041, primarily because fewer children were born after the Great Recession. WICHE
2. The pricing model is showing significant stress. At private nonprofit colleges, the average institutional tuition discount for first-time, full-time undergraduates is now about 57% for 2025–26. In other words, colleges are effectively giving back more than half of their published tuition price through institutional grants in order to attract students. NACUBO So, roughly 90% of first-year students at the private institutions participating in NACUBO's study receive institutional grant aid.
3. College is expensive, but tuition itself hasn't simply risen relentlessly in real terms recently. NCES data show average public four-year in-state tuition of about $9,000 in 2024–25, and after adjusting for inflation that figure was actually below its level a decade earlier. The bigger affordability problem includes housing, food, fees and other living costs—not merely tuition. National Center for Education Statistics
4. The financial pain will be highly unequal. A Harvard, Stanford or Princeton can draw nationally and internationally and has enormous financial resources. A small regional college with 1,500 students, modest endowment, limited pricing power and heavy reliance on tuition has much less room to maneuver. NACUBO explicitly warns that escalating tuition discounts can create greater financial stress for tuition-dependent private institutions.
5. Small endowments. Personally, I think a $1 billion+ endowment will help stave off financial ruin. Only 89 schools have $1 billion endowments or more, ranging from Harvard down to SCU ($1.67 bils.) and Fordham ($1.05 billion).
Lastly, I think state schools will fall under pressure, particularly as the states have to accommodate aging populations. Here's California's percentage of the budget dedicated to post-high school education compared with retirement payments:
Fiscal year Higher education Retirement*
1985-86 ~15.0% ~3.6%
1995-96 ~11.7% ~3.9%
2005-06 ~11.4% ~4.1%
2015-16 ~12.3% ~6.0%
2025-26 ~10.0% ~6.1%
* Doesn't include city, county or other non-state based retiree payments
Other California costs rising most quickly as a percentage of the overall budget:
1. Health care / Medi-Cal, double the percentage (from 10.5% to 20% of General fund spending in that time).
2. K-12 education grew from about 20% to 36%. Thanks to Prop 98 (1988), which materially changed the structure of the budget.
3. Public employee pensions and health benefits.
4. Corrections and prisons.
5. Health and human services beyond Medi-Cal.
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