How to Pick a College That Won’t Close on You: A 10-Minute Financial Health Check

Colleges close. Even 133-year-old ones. Here is how to find out if yours is solid before you sign the enrollment contract.

TL;DR: At least 16 nonprofit colleges announced closures in 2025, matching 2024, and a Federal Reserve Bank of Philadelphia model projects the annual closure rate could more than double under a worst-case enrollment scenario. You do not need a finance degree to check on a school before you commit. Five free public datasets, ten minutes, one checklist. This guide shows you exactly where to click.

Why this matters right now

The trend is unambiguous. Sixteen nonprofit institutions announced closures in 2025, matching the 2024 count and continuing a rate that roughly doubled between 2011 and 2023 (Inside Higher Ed; Hechinger Report). Moody’s now forecasts that 16% of private institutions will operate with negative earnings margins in 2026, up from an estimated 12.2% in 2025 and just 7.2% in 2024 (Inside Higher Ed, November 2025). Fitch labeled the sector’s 2026 outlook “deteriorating”; S&P warned of “mounting operating pressures” (Higher Ed Dive, January 2026).

Researchers at the Federal Reserve Bank of Philadelphia tested their closure-prediction model against real outcomes: of the 100 most-at-risk institutions the model flagged, 84 actually closed within three years. Under a worst-case 15% enrollment decline, as many as 80 additional colleges could close per year — more than doubling the historical average (Kelchen, Ritter & Webber, Working Paper 24-20).

The good news: the same data points the Fed used to build that model are publicly available. You can run a light version of the same check in about ten minutes.

The 10-minute check

Grab a notebook and the URL of any college you are considering. Here is the walkthrough.

1. Financial Responsibility Composite Score (2 minutes)

The U.S. Department of Education calculates a Composite Score for every private nonprofit and for-profit institution that receives federal student aid. It combines three ratios — liquidity, ability to borrow, and net income — into a single number between -1.0 and 3.0.

• 1.5 or higher: “financially responsible.” No concerns.
• 1.0 to 1.4: passing but subject to additional federal monitoring.
• 0.9 or below: “not financially responsible.” The school must post a letter of credit of at least 10% of its prior-year federal aid to keep participating in Title IV programs.

Look your school up at studentaid.gov/data-center/school/composite-scores. The file lists every institution with its score. A score below 1.5 is not a dealbreaker, but it is a flag to dig deeper.

One caveat, documented by Brookings: the score reflects a snapshot from a prior fiscal year, so it can miss rapid deterioration. Use it as a starting point, not the last word.

Public universities and community colleges are exempt from the Composite Score because they are backstopped by their state, so skip this step for them and go to Step 2.

2. Enrollment trend (2 minutes)

Multi-year enrollment decline is the single strongest predictor of closure in the Fed’s model. It is also the easiest number to find.

Go to NCES College Navigator, search for the college, and open the Enrollment panel. Pull total enrollment for each of the last five years.

• Flat or growing: good sign.
• Declining under 5% cumulative over five years: usually manageable.
• Declining 10% or more over five years, or accelerating downward: serious flag.

Limestone University, which announced closure in April 2025, had seen enrollment fall from 3,214 in fall 2014 to about 1,600 when it closed — roughly in half over a decade (Inside Higher Ed, May 2025). Northland College, a 133-year-old Wisconsin liberal arts college, closed in 2025 with enrollment down to about 250 students (Higher Ed Dive). Neither collapse was a surprise to anyone tracking the trend lines.

3. Endowment per student (2 minutes)

An endowment is not a bank account the college can spend freely, but it is a cushion. Low endowment + high tuition dependency = low margin for error.

On the same College Navigator page, open the Finances panel. You will find total endowment assets. Divide by total enrollment to get endowment-per-student.

Rough benchmarks:

• Under $10,000 per student: thin cushion. Common at tuition-dependent small privates, including many that have closed.
• $10,000 to $50,000: moderate.
• Above $50,000: robust.
• Elite privates often exceed $500,000.

Northland College’s endowment was about $32 million at closure — not trivial in absolute terms, but inadequate relative to its operating deficits (Inside Higher Ed, February 2025).

4. Tuition dependency (1 minute)

Schools that get 80%+ of their revenue from tuition are fully exposed to enrollment shocks. Those with diversified income — research grants, state appropriations, auxiliaries, big endowments — are less fragile.

You will not find “tuition dependency” labeled as such on College Navigator, but you can approximate it:

• Open the Finances panel on Navigator and note net tuition revenue and total core revenues.
• Divide the first by the second.

For context: heavily tuition-dependent means 80% or more. The Phila Fed model uses this exact ratio as one of its core predictors.

5. Accreditation + teach-out protection (3 minutes)

Accreditation is the gate that determines whether your credits transfer, whether your degree is recognized, and whether you qualify for federal aid. Verify it at the source — not from the school’s own website.

• U.S. Department of Education DAPIP: ope.ed.gov/dapip. Confirms the college is accredited by a Department-recognized body.
• CHEA directory: chea.org/search-institutions. Cross-check.

While you are there, note the accreditor’s name (e.g., Higher Learning Commission, Middle States, SACSCOC). Pull up the accreditor’s website and search the school. You want to confirm:

1. Status is “accredited” (not “probation,” “show cause,” or “warning”).
2. The date of the next scheduled review.
3. No public notices of action in the last 24 months.

If any of those look off, slow down. Loss of accreditation is typically the final step before closure.

Teach-out agreements are the insurance policies no one mentions until it is too late. A teach-out is a formal plan — required by accreditors when a school signals financial distress or intent to close — that lets currently enrolled students finish their degrees at another institution with minimal disruption (HLC policy FDCR.B.10.010).

Before enrolling, email the admissions office one question:

“Does this institution have a current teach-out agreement on file with the accreditor, and if so, who is the partner institution?”

Most schools will not have one, and that is fine — they are only required when trouble is imminent. But you want the school to answer clearly, not deflect. Cornish College of the Arts in Seattle shows what a well-handled wind-down looks like: Seattle University absorbed the program through a formal asset-contribution merger in 2025, and students continued their degrees without losing credits (Seattle University announcement).

Red flags that the basic check can miss

The five-step walkthrough covers most cases. Three additional flags are worth a follow-up search:

• Multiple consecutive operating deficits. Find the school’s most recent IRS Form 990 at propublica.org/nonprofits (for nonprofits). More than two years of deficits is a signal.
• Recent large layoffs or program closures. A quick Google News search for “[College name] layoffs” will surface these. Program cuts are often the first round before a wider announcement.
• Bond rating downgrades or going-concern notes. Moody’s, S&P, and Fitch publish ratings for institutions with public debt. Search “[College name] Moody’s rating” or “[College name] S&P downgrade.”
• Board or presidential turnover. Three presidents in five years is rarely a coincidence.

One more subtle signal documented by The Hechinger Report: small, religiously affiliated colleges in rural areas have been disproportionately represented in recent closures. More than half of the 79 nonprofit colleges that closed or merged since 2020 were religiously affiliated. That is not a reason to rule any one school out, but it is a reason to look more carefully.

Green flags that most students overlook

Strong financial health shows up in less obvious places too:

• Growing online enrollment. Schools that have successfully built online programs have a revenue stream that is less dependent on residential enrollment of traditional-age students.
• Membership in a state system. Cal Maritime’s 2025 merger into Cal Poly San Luis Obispo is one example of how state systems absorb struggling campuses rather than closing them.
• Recent capital campaigns that met their goals on schedule. Announced as press releases on the college website.
• Diversified revenue. Research universities, health systems attached to academic medical centers, and regional publics with multiple campuses tend to be more resilient.

See our best-value colleges rankings for schools that consistently score well on both affordability and outcomes, and our best colleges rankings for the broader list.

If your current school is already shaky

If you are already enrolled and the warning signs stack up, you have more options than you might think:

1. Get your transcripts. Request official transcripts now, not when an announcement hits. Closure announcements typically include a “records will be transferred to X” line, but getting copies in advance is free and painless.
2. Ask about transfer articulation. Reach out to admissions offices at one or two likely transfer destinations and ask which of your credits would transfer.
3. Understand your teach-out rights. If a closure is announced, the accreditor is required to ensure a teach-out option. You do not need to scramble on day one.
4. Know the Title IV refund rules. Federal aid refunds follow specific formulas if a school closes mid-term. The Department of Education and the accreditor coordinate these.
5. File a Borrower Defense claim if warranted. If the school closed and misrepresented its stability to enroll you, federal loan discharge may be available.

The one-page email template

Forward this to admissions when you are serious about a school. The answers you get — and how quickly — are informative either way:

Subject: Questions about institutional stability

Dear admissions team,

Before I finalize my enrollment decision, I would appreciate brief answers to the following:

1. What was total enrollment for each of the last three academic years?
2. What is the institution’s current Financial Responsibility Composite Score?
3. Is there a current teach-out agreement on file with the accreditor? If so, with which partner institution?
4. When is the next scheduled accreditation review?
5. Has the institution run an operating deficit in any of the last three fiscal years?

Thank you for your time.

A school in good shape will answer clearly. A school in trouble will either deflect or go silent. Both responses are data.

What to do with all this

Running this check for every school on your list takes about an hour for five schools. For most students, the numbers will be reassuring — most colleges are not closing. The point is not to panic. It is to avoid being the student whose 133-year-old college closes four months into sophomore year.

If you are a counselor, building this check into the standard college-search conversation is worth the small upfront time. The data is free, the sources are federal, and the conversation it opens up — about finances, about risk, about matching schools to students — is the conversation that serves families best in 2026.

You can find all 6,000+ U.S. colleges and universities, including full enrollment and financial data pulled directly from IPEDS, across our colleges directory.

---

Sources

• Inside Higher Ed — “The Colleges That Couldn’t Survive 2025” (December 2025) — insidehighered.com
• Federal Reserve Bank of Philadelphia — “Predicting College Closures and Financial Distress,” Working Paper 24-20, Kelchen, Ritter & Webber (December 2024) — philadelphiafed.org (PDF)
• Higher Ed Dive — “What 3 credit ratings agencies forecast for higher ed in 2026” (January 2026) — highereddive.com
• Inside Higher Ed — “Moody’s Projects a Negative Outlook for Higher Education” (November 2025) — insidehighered.com
• U.S. Department of Education — Financial Responsibility Composite Scores — studentaid.gov
• Brookings Institution — “Understanding financial responsibility scores for private colleges” — brookings.edu
• NCES College Navigator — nces.ed.gov/collegenavigator
• U.S. Department of Education — Database of Accredited Postsecondary Institutions and Programs (DAPIP) — ope.ed.gov/dapip
• Council for Higher Education Accreditation — Institution directory — chea.org/search-institutions
• Higher Learning Commission — Approval of Teach-Out Arrangements (policy FDCR.B.10.010) — hlcommission.org
• The Hechinger Report — “Tracking college closures,” Villeneuve & Sanchez (Oct 2024, updated Dec 2024) — hechingerreport.org
• The Hechinger Report — “As colleges close, small religious campuses in rural states are among the most imperiled” — hechingerreport.org
• Inside Higher Ed — “Northland College Announces Closure” (February 2025) — insidehighered.com
• Inside Higher Ed — “Limestone University Announces Closure” (May 2025) — insidehighered.com
• Seattle University — “Agreement Sets Stage for Cornish College of the Arts at Seattle University” (March 2025) — seattleu.edu

Editor’s note: U.S. market focus; public data and reporting current as of April 2026. This article is informational, not financial or legal advice.