How to Spot Financially Struggling Colleges During Your College Search
When Syracuse University recently announced plans to restructure several academic programs, many parents started asking the same question: How do you know if a college is financially healthy? While Syracuse is nowhere near closing, its announcement reminded families that colleges constantly make financial decisions—some routine, some signs of deeper problems.
In just the past year, colleges including Siena Heights University, Trinity Christian College, Sterling College, Providence Christian College, and others have announced closures or plans to cease operations. While these schools represent a tiny fraction of the more than 3,000 colleges in the United States, they remind families that institutional stability deserves a place on every college search checklist.
Why are colleges in financial trouble?
Several long-term trends have created financial pressure for many colleges. The shrinking number of traditional college-aged students in some regions has intensified competition for applicants. At the same time, operating costs continue to rise while families are becoming more price conscious, forcing colleges to offer larger merit scholarships to attract students. For institutions that depend heavily on tuition revenue, even a modest decline in enrollment can have a significant financial impact.
What does financial stress look like?
Colleges have several options to meet decreased demand. They will center around:
Satellite Campus Closures for larger state schools,
Eliminating majors with little to no enrollment,
Merging departments in order to reduce resources,
Reducing faculty resulting in increased class sizes,
Accreditation problems - A college loses accreditation primarily due to failure to meet established academic, financial, or administrative standards. The process involves evaluations, warnings, and opportunities for correction, but persistent non-compliance can lead to revocation
Merging with another institution.
How parents can spot warning signs:
You should go to each school’s Common Data Set (CDS), which outlines each item on this list. You can find this data for many colleges at this link.
Freshman retention: the number of freshmen, based on those enrolled for the previous year, that returned for the following year. Freshman retention measures the percentage of first-year students who return for their sophomore year. Colleges with consistently low retention rates may indicate problems with student satisfaction, affordability, academic support, or institutional stability. (Common Data Set: section B, line 22)
4 and 6 year graduation rates: these numbers count towards persistence of students to obtain degrees. If a school is in a stable financial situation, students will be expected to graduate by 6 years, which includes possible major changes. Graduation rates reflect how successfully students complete their degrees. While many factors influence graduation—including academic preparation and changing majors—persistently low graduation rates can signal institutional challenges worth investigating. (CDS line B4)
Enrollment trends: how many students are enrolling per year. Look at the trends. Assume that it should be close to constant. Big dips should cause concern. One year's decline isn't necessarily concerning. Look for a pattern over several years. (CDS section C1)
Yield rate: colleges measure yield every admissions cycle. Yield is the number of students who enroll divided by the number of students accepted. The average yield rate for 4 year colleges 2022 was 30%. The more selective a school is (lower admit rate), the more this number increases, and vice versa. A declining yield rate may indicate that admitted students are increasingly choosing to enroll elsewhere. (CDS section C1, will have to be calculated).
A Note on Merit Scholarships
Merit scholarships are a normal part of college admissions and are offered by many financially healthy institutions. However, if a college provides merit aid to nearly every enrolled student while enrollment continues to decline, it may suggest the institution is relying heavily on tuition discounting to fill its incoming class. Like any single metric, this should be viewed alongside graduation rates, retention, and enrollment trends—not in isolation. It will be found in Section H2 of the Common Data Set.
Going beyond the numbers
No single statistic tells the whole story. A low retention rate, generous merit aid, or declining enrollment doesn't automatically mean a college is in financial trouble. Instead, think of these as pieces of a larger puzzle. When several warning signs appear together, it's worth taking a closer look before adding a college to your student's list.
How I Evaluate Colleges for My Clients
When I create college lists, I write a few key notes on each to give the students data on the majors, community, and resources. In addition, I make every effort to include schools that offer merit aid to make them more affordable for families. Every school will be researched for availability of majors, and any recent news updates on financial health, such as budget and endowments.
If you need help creating a college list that will include schools that are currently in good financial standing, book a complimentary 20-min Strategy Session to discuss how we can work together to increase your student’s college admissions chances.
Frequently asked questions:
How can I tell if a college is financially stable?
Look at retention rates, graduation rates, enrollment trends, recent news, accreditation status, and the Common Data Set.
What is the Common Data Set?
The Common Data Set is a standardized report published by many colleges that includes admissions, enrollment, financial aid, graduation rates, and other institutional data.
Does a low graduation rate mean a college is failing?
Not necessarily. Graduation rates should be considered alongside retention, enrollment trends, and other indicators.
Should I avoid colleges that offer large merit scholarships?
No. Merit scholarships are common. However, if a college is heavily discounting tuition while enrollment continues to decline, it may warrant a closer look.