Hundreds of US Colleges Poised to Close in Next Decade, Expert Says

Huron Consulting Group forecasts that as many as 370 private U.S. colleges will close or merge within the next decade, driven by a declining prospective student population. This projection, which is more than triple the closures seen in the prior ten years, highlights a significant structural shift in higher education with potential implications for real estate, education-focused investments, and related financial sectors.

Analysis

A forecast from Huron Consulting Group (HURN) indicates a significant acceleration in the consolidation of the U.S. higher education sector, with a projection that as many as 370 private colleges may close or merge within the next decade. This figure is more than triple the number of closures recorded by the National Center for Education Statistics in the ten-year period leading up to 2020, signaling a severe structural shift. The primary driver identified for this trend is a fundamental decline in demand, specifically a dwindling number of prospective students. This demographic pressure is expected to disproportionately affect private, nonprofit two- and four-year institutions, creating significant headwinds for their operational and financial viability and posing risks to ancillary sectors such as local real estate and education-focused financial instruments.

Key Decisions for Investors

• Investors should conduct a thorough review of portfolios for exposure to municipal bonds issued by smaller, less-selective private colleges, as these instruments face heightened credit risk amidst declining enrollment revenue.
• Consider underweighting or hedging positions in student housing REITs and other businesses that are heavily concentrated in servicing at-risk private colleges, favoring those with exposure to larger, more stable public or elite private universities.
• Monitor for opportunities arising from sector distress, including M&A where stronger institutions may acquire struggling ones, and consider consulting firms like Huron that stand to benefit from increased demand for restructuring advisory services.