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August 5, 2024

Challenges grow for higher education broadly

Jennifer Widness
By Michael Puffer
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The University of Hartford is far from unique in facing financial headwinds, as colleges across the Northeast and beyond deal with demographic shifts and inflation.

“We do have a negative outlook on the sector as a whole,” said Emily Wadhwani, lead higher education analyst for Fitch Ratings. “Hartford, they are among company. The question will be whether schools can find a sustainable fix to these problems, not a one-time fix.”

Higher education faces a declining customer base with the U.S. producing fewer high school graduates, as well as increasingly budget-conscious families, Wadhwani said. That’s putting pressure on colleges that are heavily reliant on tuition, particularly smaller institutions with around 1,500 or fewer students.

They can least afford enrollment dips.

Colleges are also finding tuition hikes unpalatable at a time when they are increasingly required to issue financial aid to fill lecture halls, further compressing budget margins, Wadhwani said. Universities that prosper tend to be larger and have strong non-tuition revenue streams, such income-producing endowments or research that can be monetized, she said.

Emily Wadhwani

“What we are seeing is a lot of haves and have-nots,” Wadhwani said. “Where the have-nots have the most trouble is in the enrollment pipeline. … We are seeing more closures and consolidations, shrinking of staff. A good section of the market is really feeling the pressure.”

A Fitch analysis released in March found an increasing number of higher-education institutions running afoul of bond requirements. The number of colleges that either missed debt payments or failed to meet certain technical bond conditions ranged from three to six per year between 2017 and 2022, to 17 in 2023, according to Fitch.

Fitch’s analysis shows colleges with bond problems in 2023 served high percentages of minority and low-income students, averaging 55% non-white enrollment.

These colleges face a litany of challenges, including processing delays in federal financial aid applications; overtime pay proposals; new regulations on mergers and acquisitions; the U.S. Supreme Court’s abolition of race-conscious admissions; as well as increasing state efforts to provide low-cost college to lower-income students, the analysis noted.

Recovering enrollments

The COVID-19 pandemic prompted enrollment fluctuations nationally in the past few years, said Jennifer Widness, president of the Connecticut Conference of Independent Colleges. Some institutions have recovered more quickly than others, typically those that are the most selective, she said.

“Others — both public and private — are working their way back,” Widness said. “With smaller classes enrolling in both the fall of 2020 and the fall of 2021 at many schools, the fiscal impact of the pandemic will last for more than four years.”

Overall, enrollment at Connecticut colleges has been on an upswing for the past three years, reaching 195,033 students during the 2023-2024 academic year, according to data from the state Office of Higher Education.

Widness also noted that the number of high school graduates in Connecticut has been in decline since 2017, a trend that’s expected to continue through 2037.

There are other challenges, including a steep reduction over the past decade in the amount of needs-based financial aid that Connecticut supplies to students at private, nonprofit colleges.

In 2022, Connecticut spent $1,058 per undergraduate on financial aid, ranking it 18th among states, according to an estimate by the National Association of State Student Grant Aid Programs.

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