Why Are Many Private Colleges Ignoring the Looming Threat of the Demographic Cliff?

by Michael K. Townsley | Mar 8, 2026 | Private Colleges & Universities in Crisis

The Slender Thread Blogs 1to 4 and articles from Higher Ed Dive, Inside Higher Ed, and The Chronicle of Higher Education make it clear that demographic cliff, when the high school applicant pool massively shrinks is looming ahead in the year. Nevertheless, Inside Higher Ed recently reported that 87% of college presidents believe that their college will smoothly ride through the whitewater rapids from the demographic cliff. Given the tightened fiscal conditions among since COVID, it would seem that the prudent course would be to prepare strategies to reduce the financial effect of the demographic cliff so that the college is not caught unawares.

So why do so many college presidents take a laissez-faire attitude to these existential threats? This issue strikes at the heart of leadership in higher education. The question boils down to a classic conundrum regarding presidents in higher education – are they merely ‘ambiguity game players’, who wait for a line-up of internal forces to confront a problem, or should they be dynamic manager-leaders, who confront threats to their institution.

President – As an Ambiguity Game Player?

What is an ‘ambiguity game player’? Michael Cohen and James March used the term to describe leadership in a university, where dual governance, multiple stakeholders, and ambiguous policies and missions muddle decision-making for the president. An ‘ambiguity game player’ as leader is passive. While they recognize that an existential crisis is on the event horizon, they do not press the organization to quickly take steps to keep the college from slipping into deep financial stress.

When ambiguous leadership conditions exist, and in most colleges, they represent common governance entanglements, presidents believe that they have little choice but to wait until the interests of the major players in the governance structure line up so that a decision might be possible. However, an alignment of interests and the decision that follows does not mean that the decision takes into account the mission, resources, and strategic needs of the college. The process of waiting and working with conflicting interests to produce a decision, reduces a president from a leader to a passive game-player who tries to maneuver around a game board with multiple opponents whose interests rarely align among themselves or with the interests of the college. In other words, the president becomes an ‘ambiguity game player.’

Involvement of the board introduces another layer to the game and if the president passive is vis a vis the board, then it a strong strategic and operational response will depend on the willingness of the board to accept heated opposition. Regrettably, many boards under the ambiguous game scenario are also passive and also prefer to avoid conflict, which leaves the college survival subject to the weak internal actions and luck that the forecasted threats will not be as intense as claimed.

Unfortunately, the current long-term forecast regarding the demographic cliff, massive technological changes, and changes in degree expectations, renders a president, who is an ‘ambiguity game player style’ an ineffective instrument of decision-making. These presidents will find that events will overwhelm the decision time horizon and push a credible response until long after a college is crushed by these existential forces.

President as Manager-Leader

In times of crisis, before a crisis appears a management-leader constantly scans the horizon for threats and opportunities to successfully. They are not passive leaders waiting for internal forces to congeal around a decision but press a solution throughout the organization. Active and expeditious management requires continuous information on external threats to operations and financial stability. Under the management-leadership concept, a management team is assigned to respond strategically and operationally. The president can either be on the team or have the team present their proposals to the president who involves all members in a critical analysis of the proposal, obstacles, and potential for success or failure. The president keeps the board fully informed because any large scale strategic or operational changes will require their sanction before the action can be taken.

Active and expeditious management does not mean being reckless. It means taking a disciplined and rational approach to threats and strategy by scanning the horizon for threats, analyzing the impact of the threat to the college, identifying operational strengths and weaknesses, formulating strategic and operational responses, testing the responses, setting-up an operational plan to put the responses in action, continuously monitoring performance, determining where revisions are needed, and regularly reporting performance, obstacles, and successes or failures to the president.

The President as Manager-Leader is not a natural phenomenon. It requires deep training in all aspects of academic and operational centers and thoughtful and rigorous review by monitors and colleagues. Furthermore, the aspirant president must continuously test their skills by identifying institutional problems and designing strategic and operational response. Then the aspirant should ask either their president or another president to critique their work. The development of a good manager-leader does not happen in months nor in a year; it can take years along with ever increasing operational responsibility.

Can a College Survive with an ‘Ambiguity Game Playing President’?

The sad story for a college with an Ambiguity Game Playing President is that this person has been educated, socialized, and rewarded to avoid risk, lead from the rear, and hope fate is good to the school. Here is a partial solution to this problem, but it depends on the willingness of the board of trustees to press hard for strategic change.

• If the president is reluctant to lead, then the board must determine if that is the person that they want as president.
• If the board or several key board members see rising deficits as a threat to a college’s financial stability, the board should contract with a financial analyst to review the current and five-year forecast of financial performance. The forecast should use the best available estimates for enrollment, expenses, and other threats that may be on the horizon.

Slender Thread 5
Coping Suggestions for the Coming Demographic Crisis

by Michael K. Townsley | Mar 8, 2026 | Private Colleges & Universities in Crisis

Presidential Perception of the Well-Being of Their College

Inside Higher Ed^[1] reported that 87% of college president “expressed strong financial confidence” that their institution would be financially stable over the next five years with 83% saying the same over the next ten years. On the other hand, 19% were in serious discussions about a merger, and 9% expected to merge within five years. So, are more than 80% of college presidents deluding themselves, or do they have unique insight that the coming demographic, technological, and confidence in higher education crisis will be easily overcome through deft management.

The preceding four ‘Slender Thread’ blogs suggest that many of the college presidents in the survey may be a little too sanguine. Specifically, I am not sure that their confidence is warranted given the scale of the demographic cliff, the technological smashing of the traditional method of delivering higher education, the growing belief that a degree costs too much, the steady drumbeat from employers claiming that graduates lack basic skills, and the insistence by new students that a college degree must immediately lead to a well-paid career.

The following data tables show what is happening to private colleges as the dramatic changes in higher education begin to gain momentum. These tables suggest that it would be prudent for private college presidents that they need to take into account that their college may not experience a soft landing. Five years and especially after ten years as a massive onslaught slam into their shield of confidence that the future holds little threat to their colleges. Maybe the 19% beginning merger discussions have a more realistic appraisal about the powerful forces threatening the viability of their institutions.

Data on the Count of Private Colleges from 2017 to 2024

Tables 1 and 2 along with Chart 1show what happened to private colleges that are grouped into two sets: FTE<1,000 and FTE>=1,000 between the period 2017-2024. As enrollment changed between 2017 and 2024, an interesting change took place, when fifty-nine large colleges dropped into the category of small colleges. As the preceding four Slender Thread blogs pointed out, small colleges face greater risks of financial distress. The problem facing these size category changers is whether the fall in enrollment will continue until they disappear from the scene.

Table 1

Table 2

Chart 1

Dealing with the Financial Challenges of the Demographic Bust

Colleges that are living on the slender thread of survival must begin immediately to make deep strategic changes if they want to stop the slide into financial distress. Here are several suggestions:

1. Boards must clearly inform employees that the president’s strategic and operational changes are strongly supported.
2. Cut the employee headcount; nearly 70% of operational costs involve the cost of employee compensation.
3. Cut non-productive operational expenditures.
4. Cut non-productive academic programs where the costs are greater than the tuition revenue produced by the programs.
5. Consolidate offices, classrooms, and residence halls. Savings include – utilities, insurance, security, and maintained. Sell buildings that are closed.
6. Bargain with lenders to reduce interest rates or forgive debt.
7. Keep lenders from calling loans because the college has violated covenants.
8. Arrange with the proper governmental officials to borrow from the endowment.
9. Stop expanding tuition discounts because they are probably counterproductive; i.e., increased discounts are not generating enough enrollment revenue to offset the discount.
10. Select revenue strategies that can be implemented quickly and have a strong chance of success.
11. Do not choose small revenue strategies like a museum or small academic programs that will attract too few students.
12. Figure out what your college does better than your competitors and advertise the advantages of enrolling at your college.
13. Fine tune your academic program to be better than your competition.
14. Get the name of your college in the eye of the public as often as possible. Work hard to get out good news because there will be lots of bad news.
15. Don’t dawdle, time is scarce and get in command of the situation before financial distress overwhelms all strategic options.

Note about the data set used in the study:

The data set includes 44 private colleges from IPEDS for the period 2017 to 2024 that offered a four-year degree subject to these exclusions because they have different business models: seminaries, yeshivas, art and music schools, research colleges, and colleges with missing data. The last year for the data is 2024; This set of colleges was split into two enrollment groups: FTE < 1,000 students and FTE >= 1,000 students. The data was then averaged for the two groups for each variable by year. The first chart has the basic data trend for both sets of private colleges, and the next two charts show the linear and a second-degree polynomial trend, i.e., a quadratic equation.

Editorial Assistance by Jack Corby, Vice-President of Stevens Strategy

1. Josh Moody (February 26, 2026); (Retrieved February 24, 2026) “Survey: What Presidents Really Think”; Inside Higher Education; What college presidents are thinking about in 2025. ↑

Slender Thread 4
Where are Total Net Assets Headed for Private Colleges

by Michael K. Townsley | Mar 8, 2026 | Private Colleges & Universities in Crisis

Slender Thread 4 deals with the outcome of the net revenue flows from enrollment to unrestricted net assets and finally to total net assets. The difference between unrestricted net assets and total net assets is that the first holds assets that can be converted to cash, though some unrestricted assets are not easily convertible and may even be devalued at the time of conversion, like receivables, inventory, and short-term assets tied to the bond market.

Net assets are the difference between total assets, which includes unrestricted assets, restricted endowments, and property; and liabilities, which includes bonds, notes, and other long-term loans. Beyond the information that we already have that unrestricted net assets are under stress, the issue is – are total net assets growing or shrinking in value before the full impact of the demographic crash?

Chart 1 displays the change in total net assets between 2018 and 2024.^[1] This chart indicates that the six year period was a bumpy ride for small and large colleges. Total assets took their biggest hit in 2023, when the change in these assets took a big drop from large positive change in 2022 to a negative change. As was noted in the discussion on unrestricted net assets in Slender Thread – 3, the large influx of federal funds from COVID loans into unrestricted net assets carried over to total net assets. Then in 2023, the federal spigot closed, and the change in total net assets for small and large colleges dropped like a rock. The change in small college total assets slipped into negative change territory, while large colleges came within kissing distance of the zero-percentage line. In 2024, the change in total net assets bounced positive with small colleges reporting a greater change than did large colleges. Of course, the question remains – was the upward tick in 2024 indicative of long-term change in total net assets or was the change more like the up-down cycle between movements in 2019 and 2023 or the change could have been due to larger investment returns. In other words, will private colleges after 2024 return to the bumpy ride in total net assets that proceeded 2022? Charts 2 and 3 address long-term trends by using a linear and a second order polynomial to smooth the bumpy ride depicted in Chart 1.

Chart 1

1. The data set includes 44 private colleges from IPEDS for the period 2017 to 2024 that offered a four-year degree subject to these exclusions because they have different business models: seminaries, yeshivas, art and music schools, research colleges, and colleges with missing data. The last year for the data is 2024; This set of colleges was split into two enrollment groups: FTE < 1,000 students and FTE >= 1,000 students. The data was then averaged for the two groups for each variable by year. The first chart has the basic data trend for both sets of private colleges, and the next two charts show the linear and a second-degree polynomial trend, i.e., a quadratic equation. ↑

According to the linear trend in Chart 2; both small and large private colleges have a positive slope. However, the slope for small colleges is magnitudes less than the slope for large colleges. The slow rising slope for small colleges raises the question – will the change in the slope of these colleges turn negative and put the them in serious financial distress? Nevertheless, the trend in the rate of change remains above 6% for small colleges, which is a relatively strong trend over time.

Chart 2

The polynomial trend in Chart 3 provides a different perspective than the linear trend in Chart 2. While the linear trends in Chart 2 iron out the bumps with a rising trend for both college groups, the polynomial trend in Chart 3 depicts a parabolic structure that rises through 2022 for large colleges and through 2021 for small colleges. After those years, the parabola turns down with the depth of descent being greater for small colleges. In either case, the coming sharp downward shift in the high school graduate pools after 2026 will have a profound effect on large and small colleges that will require them to take prudent measures very soon to preserve their financial resources. Since many small colleges are already at or near financial distress levels, then will need to act quickly in the next year to cope with massive losses in revenue.

Chart 3

Editorial Assistance by Jack Corby, Vice-President of Stevens Strategy

Slender Thread 3
Effect of Change in Enrollment on Unrestricted Net Assets

by Michael K. Townsley | Mar 8, 2026 | Private Colleges & Universities in Crisis

The Slender Thread blogs consider whether private colleges are producing sufficient financial resources to survive the demographic cliff that is fast approaching.^[1] Slender Thread – 3 looks at the relationship between enrollment and unrestricted net assets at 944 private colleges. This issue is important for two reasons: first, enrollment generates the greatest proportion of revenue for most private colleges and universities, and second, the revenue, as student bills are paid either by cash from students or by government grants, unrestricted net assets help fill the colleges cash accounts. These accounts are used to pay: employees, utilities, suppliers, minor maintenance contracts, and other operational expenses. When cash fall below an amount needed to cover payments for three months, a college may be forced to take short-term loans, which carry high interest rates and may have other adverse effects on the budget besides interest costs, which could further increase financial risk in light of the demographic cliff.

Chart 1 uses a simple ratio to estimate the impact of enrollment on unrestricted net assets: (Unrestricted Net Assets / FTE). The first chart illustrates that enrollment at small colleges is barely providing new funds for unrestricted net assets. In addition, the ratio for large colleges was erratic between 2018 and 2024. The data for both small and large colleges resulted in increases in the ratio in 2022 with large colleges showing a larger jump in the ratio. The bump in 2022 was probably due to the large sums pumped into colleges by the federal government to provide relief from the financial ravages caused by closing of most colleges for a year and transferring their students to on-line programs. The quick and unexpected move to online programs forced college to make large technology purchases.

Chart 1

1. The data set includes 44 private colleges from IPEDS for the period 2017 to 2024 that offered a four-year degree subject to these exclusions because they have different business models: seminaries, yeshivas, art and music schools, research colleges, and colleges with missing data. The last year for the data is 2024; This set of colleges was split into two enrollment groups: FTE < 1,000 students and FTE >= 1,000 students. The data was then averaged for the two groups for each variable by year. The first chart has the basic data trend for both sets of private colleges, and the next two charts show the linear and a second-degree polynomial trend, i.e., a quadratic equation. ↑

According to the linear trend chart, larger colleges are maintaining strong and positive growth for the ratio. Given that the ratio is unrestricted net assets to FTE, the positive trend could be due to either a smaller FTE denominator or increasing unrestricted net assets. If we go back to the Blog “Slender Thread – 1”, the FTE for larger colleges was increasing between 1% and 2%. Chart 1 clearly shows that the graph line for large colleges declined for the first four years then took a large jump in 2022, probably due to massive inflows of federal funds during the pandemic. The anomalous peak in 2022 may be distorting the linear trend for larger colleges.

The situation for the linear trend for small colleges is similar to the trend for larger colleges, except that the positive slope is much smaller than the slope for large colleges. If we return to Chart, the ratio dropped to $0 dollars in 2019. Then, it began a continuous increase until 2022, with the ratio peaking in 2022. After the trend line declined between 2018 and 2019. It began a slow upward trend until 2022, when a strong upward turn jump took place. The anomalous turn upward turn in 2022 was followed by very little growth through 2024.

Chart 2

Chart 3 brings clarification for large private colleges by showing that the trend is losing acceleration in 2023 and turning down by 2024. Large colleges will need to pay close attention to the effect of slowing or falling FTE on unrestricted funds.

In the case of small private colleges, Chart 3 clearly shows the downward trajectory for the ratio. The trend for these colleges is speeding toward very dangerous territory, where financial stress will become more evident within the near future as the trend approaches $0 dollars.

Chart 3

Editorial Assistance by Jack Corby, Vice-President of Stevens Strategy.

Slender Thread 2
Are Larger Tuition Discounts Increasing Enrollment?

by Michael K. Townsley | Mar 8, 2026 | Private Colleges & Universities in Crisis

The Slender Thread blogs look at the capacity of current financial resources to survive the oncoming demographic crash. This blog, Slender Thread – 2, looks at the relationship between changes in tuition and these charts also look at the impact of tuition discounts on enrollment. Economics would suggest that a tuition discount is a price discount that brings demand in alignment with supply. In the case of higher education, demand is enrollment and supply encompasses the courses or programs offered by a college.^[1] Chart 1 uses a simple formula, (change in FTE /change in tuition discounts) to ascertain the relative effectiveness of tuition discounts on enrollment. The chart shows that small colleges, FTE < 1,000), did not having any success using tuition discounts to increase or to even stabilize enrollment in 2024. The relationship between tuition and discounts at large colleges, FTE >= 1,000 fluctuate from year to year. Large colleges reported a steady decline in the effectiveness of tuition discounts between 2019 and 2021 with rising effectiveness in 2022, but effectiveness slid between 2022 and 2024. Chart 1

1. The data set includes 44 private colleges from IPEDS for the period 2017 to 2024 that offered a four-year degree subject to these exclusions because they have different business models: seminaries, yeshivas, art and music schools, research colleges, and colleges with missing data. The last year for the data is 2024; This set of colleges was split into two enrollment groups: FTE < 1,000 students and FTE >= 1,000 students. The data was then averaged for the two groups for each variable by year. The first chart has the basic data trend for both sets of private colleges, and the next two charts show the linear and a second-degree polynomial trend, i.e., a quadratic equation. ↑

  The data and linear trends for small colleges in Charts 1 and 2 suggests that tuition discounts are counter-productive in that enrollment is not increasing relative to tuition discounts. In the case of large colleges, the linear trend indicates that tuition discounts are marginally useful in generating positive changes in enrollment. Chart 2 Chart 3 reinforces the comments in Charts 1 and 2, which suggest that tuition discounts are not effective for small colleges. It would be prudent for small colleges to determine whether tuition discounts are providing value to their enrollment strategies. During the demographic crash, many small colleges will find that continuing to increase tuition discounts will reach a point where the flow of cash from tuition for operations expenses be negligible or zero. The last chart, also, indicates that some large colleges should assess their validity of their tuition discount strategy because their polynomial trend is starting to turn negative. If that curve continues downward as the impact of the demographic crash approaches, then large colleges will find themselves in the same position as small colleges because their operational cash flows could dramatically shrink. Both small and large private colleges face some very tough decisions in the near future about the continued use of tuition discounts because discounts have become a presumably reliable strategy to increase revenue without disturbing the flow of cash to reserves. However, this assumption may have lost its usefulness. Chart 3 Editorial Assistance by Jack Corby, Vice-President of Stevens Strategy