Universities in Pennsylvania are reducing expenses by implementing layoffs and mergers in response to financial hardships.
Struggling Pennsylvania Universities Face Financial Instability Amid Enrollment Declines and Funding Cuts
Universities across the United States, including those in Pennsylvania, are grappling with significant challenges due to falling enrollment and cuts in federal funding, leading to closures, mergers, and extensive cost-cutting measures.
The past decade has seen a 15% drop in the number of students at institutions of higher learning, according to a report by the National Center for Education Statistics. This decline, particularly acute in the Northeast and Midwest regions, including Pennsylvania, is largely driven by a shrinking population of college-age students.
The financial pressures on universities have been exacerbated by reduced federal funding for higher education and research, staffing cuts at the Department of Education, and policy shifts from previous administrations. These changes have included higher taxes on university endowments and restrictions on international students.
In response, Pennsylvania universities have implemented aggressive cost-saving strategies. Campuses are being closed or merged, services such as energy, IT, health insurance, and even retirement funds are being pooled to reduce expenses. The Association of Independent Colleges and Universities of Pennsylvania (AICUP) coordinates 39 such cost-saving initiatives among its 80+ members, resulting in tens of millions of dollars saved annually.
The financial strain has led to layoffs, program cuts, and even some full university closures since 2016. This instability not only poses risks to institutional viability but also to local economies dependent on these universities. The Federal Reserve Bank of Philadelphia reported that college closures, mergers, and other forms of financial distress can have profound effects on local economies.
In Pennsylvania alone, 10 higher education institutions have either merged or closed since 2016. Seven campuses of Pennsylvania State University will close after the 2026-27 academic year due to declining enrollment and financial pressures. The closing campuses include DuBois, Fayette, Mont Alto, New Kensington, Shenango, Wilkes-Barre, and York.
Despite these challenges, the value of a college education remains high. A college degree is projected to result in about $1 million more in lifetime earnings and helps students develop critical thinking skills for future careers, such as artificial intelligence. Lincoln University's president, Allen, emphasises this point, stating that education is still the great equalizer, helping move people out of poverty and into higher socioeconomic levels.
However, Lincoln University, a historically Black university, faces additional uncertainties due to budget issues and the potential impact of staffing cuts in the U.S. Department of Education financial aid offices. Lincoln University, like many institutions, is also cutting costs and seeking ways to collaborate and pool resources to remain financially stable.
The higher education industry as a whole continues to contribute significantly to the U.S. economy. In 2022, it pumped about $1.7 trillion in goods and services into the economy and supported 18 million jobs. Despite the current challenges, universities are adapting to navigate the ongoing "Enrollment Cliff" predicted for 2025-2026, focusing on efficiency, market responsiveness, and supporting non-traditional student populations.
The financial instability of Pennsylvania universities extends to other areas, with reports indicating a decrease in funding for areas like education-and-self-development, general-news, and sports, due to reduced federal funding and policy shifts.
Amid this financial strain, universities are exploring ways to diversify their revenue streams, with some considering partnerships and collaborations in industries beyond traditional academia, such as finance, to ensure their financial sustainability.
