Choosing a college today involves far more than rankings and acceptance rates. Behind the scenes, many U.S. colleges and universities are facing serious financial challenges — challenges that can affect academic programs, student services, tuition costs, and even whether a school stays open. For families navigating the college admissions process, understanding college financial health is more important than ever.
With the Department of Education cutting research funding across many universities and many other small to mid-sized colleges missing their enrollment targets due to less international applications, colleges are having to cut costs. In 2025, Moody’s Investors Service reaffirmed its negative outlook for U.S. higher education, citing enrollment declines, rising costs, and long-term demographic headwinds. At the same time, several colleges have already closed or announced plans to shut down, while others have seen credit outlooks improve through strategic restructuring.
Moody’s 2025 Outlook for U.S. Colleges: Why the Sector Remains at Risk
Moody’s credit ratings are one of the strongest indicators of a college’s long-term financial stability. In its 2025 outlook, Moody’s maintained a negative sector outlook for higher education, reflecting continued pressure across public and private institutions.
Key factors driving this negative outlook on overall college financial health include:
Declining enrollment nationwide, particularly among small and regional colleges
Rising operating costs, including faculty salaries, healthcare, and infrastructure
Tuition dependence, especially among private colleges with limited endowments
Demographic shifts, with fewer high school graduates expected later this decade
Policy uncertainty, including research funding and federal financial aid regulations
While most colleges are not in immediate danger, Moody’s emphasizes that financial stress is structural, not temporary.
Positive vs. Negative Moody’s Outlooks: Not All Colleges Are Struggling
Despite the negative sector outlook, many institutions remain financially strong — and some have even improved their standing.
Colleges with Positive or Stable Financial Outlooks
According to Moody’s and Forbes’ 2025 College Financial Grades:
Roughly 80% of Moody’s-rated institutions still hold A-level credit ratings
Large public universities and elite private colleges benefit from:
Diverse revenue streams
Strong endowments
Graduate and professional programs
These institutions typically share disciplined budgeting, strategic enrollment management, and strong fundraising capacity.
Colleges with Negative Outlooks
Moody’s estimates that 15–20% of rated colleges now carry negative outlooks, a figure expected to grow if enrollment pressure continues.
Colleges most at risk tend to have:
Heavy reliance on tuition revenue
Small endowments
Weak cash reserves
Declining or volatile enrollment
Limited program flexibility
For families, a negative outlook does not mean a school will close — but it does signal higher risk and fewer financial buffers.
College Closures: What Has Already Happened (2024–2025)
Financial distress is no longer theoretical. Over the past two years, multiple colleges have closed or announced closures due to unsustainable finances.
Colleges That Closed in 2024–2025
Birmingham–Southern College (AL) – closed after years of enrollment decline
The College of St. Rose (NY) – shut down following financial shortfalls
Northland College (WI) – announced closure after failed fundraising efforts
St. Andrews University (NC) – closed due to long-term financial stress
Limestone University (SC) – ceased operations after emergency funding attempts failed
Eastern Gateway Community College (OH) – closed amid enrollment and accreditation issues
These closures left thousands of students scrambling to transfer — a reminder that college stability directly impacts student outcomes.
Near-Closures, Campus Shutdowns, and Mergers
Not all financially stressed colleges close outright. Many are restructuring in ways that still affect students.
Campus Closures and Consolidation
Penn State Commonwealth Campuses: Seven campuses are scheduled to close by 2026–27 due to enrollment and budget challenges
College mergers are increasingly common, as struggling institutions combine resources to survive. Vanderbilt just announced in early 2026 that it would be acquiring the campus of the California College of the Arts in San Francisco. Northeastern University was at the forefront of this trend, doing the same in New York City and elsewhere.
While mergers can preserve academic programs, they often involve program cuts, faculty layoffs, and campus closures.
Why College Financial Health Matters for Students and Families
Financial instability affects far more than a college’s balance sheet.
1. Academic Programs May Be Cut
Colleges under financial pressure often eliminate majors, reduce course offerings, or limit academic support services.
2. Tuition and Fees Can Rise
To offset revenue shortfalls, struggling colleges may increase tuition or reduce institutional aid — raising the real cost of attendance.
3. Student Experience Suffers
Budget constraints can lead to larger class sizes, outdated facilities, and fewer extracurricular opportunities.
4. Transfer Risk Increases
If a college closes or significantly downsizes, students may be forced to transfer, potentially losing credits or delaying graduation.
What Does College Financial Health Mean For the Consumer (YOU)?
First, all this means that higher education remains a buyer’s market. While there are a few dozen universities that reject more applicants than they admit, the overall college acceptance rate is about 70%. And some universities that offer good educational value have acceptance rates a lot higher than that.
Second, students with a good academic record can expect hefty discounts at many, many universities–and not just at colleges in financial trouble. True, you might not get much of a discount at the more selective schools that do not offer merit discounts. However, many schools do offer awesome financial aid packages to the handful of poor students they take every year). Once you get past the very top tier of primarily private universities, there are lots of bargains out there.
You just need to know where to find them.
And how do you find them?
The Bottom Line: Smart College Planning Requires Financial Awareness
The U.S. higher education landscape is changing. While many colleges remain strong, others face real financial challenges — and closures are likely to continue.
Understanding which colleges are financially stable and which carry higher risk is now an essential part of smart college planning. With expert guidance, families can identify colleges that not only fit academically and socially, but also offer long-term stability and value.
👉 Working with an experienced college admissions consultant can help families navigate these complexities with confidence.
Reach out to learn how Great College Advice can help in your college search
Great College Advice helps students and families make informed, strategic college decisions — from school selection and financial fit to applications and long-term outcomes. Our counselors evaluate academic fit, admissions strategy, and institutional stability to reduce stress and maximize success.
So if you’re looking for some help in this, we just might be able to provide it. We offer assistance with the college search, and there is nothing we like better than to find those bargains out there: schools that offer exceptional educational quality at an affordable price.
If you’re interested, check out our services. Then please get in touch with us to schedule your complimentary consultation.
Since 2007, the expert team of college admissions consultants at Great College Advice has provided comprehensive guidance to thousands of students from across the United States and over 45 countries across the world. Great College Advice has offices in Colorado, New Jersey, Chicago, North Carolina and Massachusetts.
In addition to our one-on-one counseling, Great College Advice extends its support through one of the most active and resource-rich Facebook Groups for college-bound students and their families: College Admissions Experts. With over 100,000 members—students, parents, and experienced counselors—this vibrant forum offers peer support and expert advice like no other.
