Amid declining enrollment, financial struggles, and pandemic after-effects, colleges in the U.S. are closing in record numbers — some with very little warning or support for currently enrolled students.

This doesn’t mean that students should forgo college altogether — research shows that higher education is still a smart investment for a variety of reasons. However, it is in students’ best interest to investigate the financial health and stability of any colleges they’re considering to ensure they’re making the most well-informed decision possible when selecting a school.

This article will explore different steps prospective students and their families can take to help determine whether the schools they’re considering are viable. It also offers guidance students can follow in the event their college closes while they are enrolled, to help prevent disruptions in their education.

How to Check the Health and Stability of Colleges You’re Considering

While colleges and universities represent access to knowledge, job training, and formative life experiences, it’s important to remember that, above all, colleges are businesses, and like any other business, they can fail. That’s why it’s important that students confirm that any institution they’re considering attending is financially healthy and well-managed, to help avoid surprise closures or disruptions in their education.

Pay attention to the school’s physical condition

If you’re considering attending a brick-and-mortar school, visit the campus in person before you enroll. Take note of the physical condition of the buildings and campus grounds. Do they look updated and well-maintained, or are there signs of disrepair and neglect? Damaged or outdated physical infrastructure is one of the biggest indications of poor financial health or mismanagement.

This can be trickier for online students. If you’re considering attending an online program offered by a school with a brick-and-mortar campus, it may be worthwhile to visit the school in person, even if you’ll be participating in virtual classes. This way, you can get an up-close look at the state of the institution before committing to it.

Read news about the school

Most of what colleges publish about themselves on their websites and social media feeds is positive, which is why it’s helpful to dig deeper into news from independent sources about any schools you’re considering.

Search for news stories about potential colleges from the past few years and find out how they have been making headlines. Have there been staff or faculty layoffs? Did the school eliminate programs or departments? Are there talks of mergers with other schools? Have they faced any major lawsuits that damaged their finances or reputation? Any of these can be warning signs that schools are experiencing financial or management challenges.

If you’re early in the search process, set up a Google notification for the school so that you’re automatically alerted about any newsworthy events there.

Research schools’ endowments and enrollment numbers

Most colleges use endowments to help fund their operations. According to the American Council on Education, “an endowment is an aggregation of assets invested by a college or university to support its educational and research mission in perpetuity.”

For the schools you’re considering, find out what their total endowment is and how much of their endowment the institution is spending annually. Experts recommend that colleges spend about 5% of their endowment each year. Institutions that regularly spend more than that or have a significant decrease in their total endowment in a short period of time may be experiencing financial difficulties or facing poor financial management. The National Association of College and University Business Offices (NACUBO) is a good place to start for information about colleges’ endowments and spending.

Another factor is what types of tuition discounts a school offers. When it comes to college tuition, there’s the sticker price, which colleges publish as the cost of attendance, and what students actually pay to attend. The difference is known as a tuition discount, which usually comes in the form of scholarships, grants, and other financial aid. While tuition discounts are beneficial to students, colleges that discount their tuition too much run the risk of not generating enough revenue to cover the costs of operating the institution.

Also look out for significant, sustained enrollment decreases and the elimination of academic programs or departments. Decreasing enrollment is often a sign of trouble, particularly at smaller schools that can’t absorb dips in enrollment, as this impacts the school’s revenue. Colleges often cut low-enrolling or expensive programs to manage costs. On the other hand, adding programs, such as online courses, can demonstrate that a school is flexible and seeking new sources of revenue to help it continue operating.

Talk to current students and faculty

Although school representatives are typically encouraged to provide positive information to prospective students, it’s worth it to dig deeper and ask probing questions to get as much unfiltered insight into a school as possible. Some questions you can ask include:

  • Have physical conditions in classroom buildings, dormitories, or campus grounds deteriorated?
  • Are academic programs and campus services being cut or in danger of being cut?
  • Have there been layoffs?
  • Is the school investing in new infrastructure?

Connecting with recent alumni can be helpful in this regard, as they may be able to be more honest about their experience than individuals who are presently associated with the school. Online forums like Reddit may also provide more information, although prospective students should always use their discretion when judging the accuracy of information posted on these types of sites.

Consider the type of school

No school is completely immune to closure, but certain post-secondary institutions are better positioned to weather changes in enrollment, revenue, and circumstances than others.

For example, Ivy League colleges like Harvard, Yale, and Princeton, which have billion-dollar endowments and long waitlists of students vying for a seat, can likely withstand all but the most catastrophic circumstances. Likewise, most public university systems, such as the University of Texas system and the University of California system, which operate multiple public colleges in their respective states, have multi-billion dollar endowments as well as significant tax revenue to maintain operations.

However, small private non-profit colleges, especially those with a niche academic focus, and for-profit colleges can face the highest risk of closure from declining enrollments and decreasing revenue. Because these types of institutions rely heavily on tuition dollars as revenue, any fluctuations in enrollment can negatively impact their bottom line. While this doesn’t mean automatic closure, failure to address these issues in a timely manner usually leads to a school shutting its doors.

What To Do If Your College Closes While You’re Enrolled

If you find yourself in a situation in which the school you’re currently enrolled in is closing, here are steps you can take to help transition to the next step in your education.

Be aware of changes at your school

Before a college closes its doors, there are usually warning signs, as outlined above. It’s important as a current student to be as aware as possible of what’s going on at your school. Have they cut programs or campus services? Have you noticed that the physical condition of academic buildings or dorms has deteriorated? Are there staff or faculty layoffs or hiring freezes? Is the college’s accreditation status in question?

Being aware of issues at your school may not help you change whether your school remains in operation, but it can help you determine if you need to formulate a plan B in case your school closes.

Additionally, new rules from the U.S. Department of Education that take effect in July 2024 require institutions to report if they are entering bankruptcy or facing expensive legal judgments. Awareness of this information can also help students determine whether they should stick with their current college or make plans to transfer to a more financially viable institution.

Find out what resources and assistance the school is providing

There is no standard protocol for college closures, which can lead to confusion and frustration among students. For example, some schools announce their closure well in advance, with plans to shut down after some or all current classes finish their degrees. Others close abruptly.

Prior to closure, some schools establish partnerships with other colleges to help students easily transfer their credits and complete their degrees, while others leave students to fend for themselves.

If your school announces it’s closing, contact an academic advisor as soon as possible to find out what, if any, resources and support the school is providing. They may be able to assist you in transferring to another school or accelerating your coursework so you can graduate before the school officially closes. You can also contact your state’s education department, which can also provide information and assistance for displaced students.

For students who are transferring to another college to finish their degree, do your due diligence to confirm that the school you’re transferring to is also financially viable, so you don’t find yourself in a similar situation again.

Get your transcripts ASAP

Current students need official transcripts as proof of the coursework they completed and to transfer credits to another institution. Depending on how quickly your school is ceasing operations, there may not be much time to obtain these records, so make this a top priority if you find out your school is closing. You can obtain official transcripts from your school’s registrar or from the National Student Clearinghouse.

Research closed school discharge relief from the U.S. Department of Education

Another common question if a college closes is how that affects student loans. Depending on the circumstances of the school’s closure, students with federal student loans through the Federal Student Aid (FSA) program may be eligible for a loan discharge. Students whose loans are discharged will not be obligated to repay their loans and may receive reimbursement of payments on their loans. Some students may automatically qualify for a loan discharge, while others will need to submit an application.

The FSA program also has additional resources and information for students enrolled at schools that close.

Take your time planning your next move

Attending a college that closes can be a jarring, upsetting experience. For many students, college represents more than just an educational experience, but a significant source of community and social connection. Like any loss, it’s important to take time to mourn your school’s closure. Seek out the support of friends, family, instructors, colleagues, and professionals to help process any emotions and concerns before you begin planning your next steps.

While it’s natural to want to immediately figure out how to continue your education and finish your degree, it’s also important to take your time when considering your options. If you’re transferring to another school, do some research to ensure it’s a good fit and that it’s financially healthy and stable so you don’t end up in a similar situation in the future.

Resources for Students