ARE SMALL COLLEGES FINANCIALLY SECURE? HOW CAN YOU TELL?

The hot topic in the press recently has been about the financial viability of small private liberal arts colleges. Can parents and students be confident in considering small private colleges? They read in the press and online about the closure of colleges, and they do not want their sons and daughters to go through the process of having to transfer to a different college due to a closure.

Beware of the self-fulfilling prophecy. A self-fulfilling prophecy is a situation where an initial belief or prediction comes true simply because a person expects it to. Because they believe the outcome is inevitable, their thoughts and behaviors subconsciously shift to make the prophecy a reality.

Very few colleges with an endowment greater than $100 million or with more than 900 students have closed. The dozens of colleges that have closed have largely been tiny “niche” colleges, many of which were “for profit” schools that failed. In the last couple of years, there have been a few “higher profile” or a little larger college closures that have hit the press: Anna Maria, Hampshire, Siena Heights, Lourdes, Limestone, Fontbonne, Northland, St. Andrews (NC), The King’s College (NY), Cardinal Stritch, Iowa Wesleyan, Trinity Christian, and a few other very tiny, specialized, low-profile colleges. These colleges represent only a fraction of the 744 small private colleges in the United States.

Be aware, yes.

Do research, yes.

But please do not just scratch off an entire demographic class of colleges based on what you have heard in the press. Beware of the effects of a self-fulfilling prophecy. We need small colleges, and we need them to thrive.

Some of the following can be a sign of distress, but not always:

1.Enrollment decline

There are fewer students graduating from high schools.

There are more high school students graduating who are choosing not to attend college.

The “perception” that small colleges are a gamble to attend leads to a self-fulfilling prophecy, so fewer people are considering them.

So please, do not assume that declining enrollment automatically raises a red flag.

2.Enrollment less than 1,000 students

There are a LOT of very viable, financially secure colleges with fewer than 1,000 students. They usually do not get much publicity in books such as CTCL and Dream School, but there are many very financially secure colleges with fewer than 1,000 undergraduates.

I was disappointed to see that Jeffrey Selingo’s Dream School book excluded any college with fewer than 1,000 students. In a Future U Podcast interview (EP204) he indicated why: “The other filter was at least 1,000 undergraduates. And you know why that is. A lot of small colleges are in financial trouble.” I find it interesting that three of the colleges that he chose in his book are private colleges with C+ or lower financial grades from Forbes, including one that Forbes graded a “D,”

Principia College has only 300 students, but its endowment is $1.1 billion. McPherson College has 800 students with an endowment of $1.6 billion. There are 55 small colleges (with less than 1,000 students) that have consistently received “B” or higher grades (from Forbes and other sources) for financial strength. I worked for one of those small colleges (Monmouth College in Illinois, enrollment of 720 students) and I can vouch for its quality and financial viability. They have an “A” rating (Forbes, 2026). Thirty (30) small colleges received an A+, A, or A- this year from Forbes. Eight (8) of these have fewer than 1,000 students:

Randolph College VA

Goldey-Beacom College DE

Goshen College IN

Hollins University VA

Monmouth College IL

McPherson College KS

Franklin College IN

Hanover College IN

3.High tuition discounting rates (aka merit awards)

In a word: competition. If all the other colleges are discounting their tuition, colleges feel the need to follow the trend. They don’t want to, but if they don’t, their enrollment will suffer. If all 700+ small private colleges would sit down and agree to “right-size” their tuition costs, this practice would disappear. (Don’t hold your breath!)

4.Tuition reduction (colleges call this by several different names)

This is basically the same as tuition discounting via merit awards, but used as a marketing technique---just something to get the attention of the consumer.

5.Cutting certain programs and the resulting loss of faculty positions (especially liberal arts courses)

This is not unique to small colleges. Colleges and universities of all sizes are cutting or reducing programs (especially programs like Latin, Greek, Philosophy, History, etc.). There are just fewer and fewer students asking to major in certain areas. Colleges need to make adjustments based on demand. On the other hand, many small liberal arts colleges are adding programs in STEM, nursing, neuroscience, computer science, AI, and data science. There are now 124 small colleges (111 of which are liberal arts colleges) with ABET-accredited engineering programs. The “addition of programs and faculty” does not seem to get the press and publicity that “reduction and cutting” does.

If a college has financial strength, keeps up with the times, and is creatively managed, it can weather all of these.

So, then, what are the biggest indications that a college might be in a risky situation?

Endowment less than $100 million

Endowment less than $100,000 per student

Consistently having expenses that outpace their revenue

Having a high liability to asset ratio.

There are many sources to find financial ratings and rankings. One is ProPublica’s Nonprofit Explorer. Also, as indicated earlier, Forbes publishes a graded list every year. Bain & Company also publishes information on the financial stability of colleges.

An AI approach:

One thing I have done recently is to use my Google AI to see what I can find out about a college. This is what I have done, and it is easy enough for you to do. Just open Google AI and ask them, “Is _____ college financially secure?” I have also asked, “On a scale of 1 to 10 (with 10 being the strongest), how do you evaluate the financial strength of _____? AI is not perfect. Its information is not always 100% accurate, but it will give you at least a starting point, with links to the original sources so you can do a thorough investigation of a college’s financial health. Note: the “1 to 10” rating scores you will get using AI tend to be even more conservative than are the Forbes ratings.

Important caveat: Finances fluctuate from year to year, and AI does its research using an inconsistent set of “sources” for statistics for various colleges. So if you are truly interested in a college that has a low rating, check directly with the college and ask the hard questions. Please ask to talk with the Director of Admissions or the Vice President for Enrollment (the admissions counselors are not always privy to all the information needed to answer your questions.)

The 2026 Forbes financial grades have have just come out in late May. Some interesting statistics:

Of the 859 private colleges and universities (of all sizes) in the U.S.:

359 of the 859 (almost 42%) received between B- and A+; 2/3 of them received at least a C.

There are 67 small private colleges (with fewer than 1,000 students) that received grades between B- and A+.

There are 256 small private colleges (with fewer than 3,500 students) that also received between B- and A+.

86 of these 256 small colleges cost the majority of upper-middle-class families (after merit, without loans) less than $30K; 149 of them cost those families less than $35K, and 188 of them cost those families less than $40K, so these small private liberal arts colleges can really save families money.

After you do your research, if your student is interested in a particular college, VISIT. College visits are crucial in the process. You may find that the information you discovered in your research is totally exaggerated, outdated, or incorrect.

Don’t be afraid, during your visit to a college, to ask pointed questions. Tell them what you have read online and what you have heard about their finances, and ask them for an update and an explanation.

During your visit to a college, look for clues: deferred maintenance, empty campus buildings, outdated technology, and reduced operational hours. Does the campus “look good?” Is it clean and well-groomed? When touring a campus, observing the physical infrastructure and daily operations can provide immediate, practical insights into an institution's financial health that marketing materials might conceal. Look for peeling paint, broken walkways, outdated HVAC units, leaky ceilings, or overgrown landscaping. Universities often delay costly physical repairs first when cash is tight.

On the other hand, is construction happening on campus? Does the campus newspaper talk about the major gifts the college has received? I had a boss at Monmouth once who said, “It’s always a good sign to see a construction crane or workers wearing hard hats” on campus. Look to see if the campus uses a “Disney” approach to keeping everything looking beautiful and perfect.

I believe in small colleges. And I believe in the future of small colleges. Will a few of these colleges close each year? Of course. I don’t think there are any years in all of U.S. history when some colleges have not closed. College closures are nothing new. But the vast majority of these 700+ colleges will be just fine, and they will give your students memories of a lifetime. There is a certain “magic” that occurs on these small private college campuses. If too many people stop considering them due to press and publicity, it will cause a self-fulfilling prophecy. Please don’t let that happen.