Nonprofit Resources

Higher Education Trends Update: Understanding the Times and Knowing What to Do

Private nonprofit higher education institutions across the United States are operating in one of the most complex and challenging environments the sector has ever experienced. Institutions face growing financial pressures, evolving student expectations, demographic shifts, and new regulatory uncertainties. At the same time, there are opportunities for institutions that embrace modernization, plan strategically, and maintain a strong, clear focus on their mission.

With these dynamics in mind, let’s explore the most pressing trends for higher education leaders to address as they chart a sustainable path forward.

The Changing Risk Environment: Enrollment, Operations, Technology, and More

Among the higher education institutions surveyed for the 2026 Top Risks Report from United Educators, admissions and retention, data security, regulatory compliance, operational pressures, and facilities and deferred maintenance emerged as the most significant concerns. These risks reflect a sector managing rising costs, a changing student population, increased cybersecurity risks, and greater external scrutiny.

From CapinCrouse’s perspective, five risks stand out as especially urgent for private nonprofit institutions:

Risk	Recommended Action Steps
Operational pressures – financial stability, operating margins	Move from incremental budgeting to program-level profitability and mission-impact analysis.
Enrollment challenges – first time and retention	Use analytics to improve discounting strategies and net revenue outcomes. Invest in early alert systems and first-generation student support.
Federal funding changes – Pell, Grad PLUS, and Parent PLUS limit changes	Evaluate your institution’s reliance on students with impacted aid and invest in grant opportunities.
Regulatory and compliance issues	Monitor potential legislation and its anticipated effect on your student population and finances.
State funding uncertainty, considering federal changes	Call your legislators and independent college and university associations to ask for their support in maintaining current funding levels. Evaluate opportunities for expansion.

Deferred maintenance and data security also warrant careful attention.

Another critical area is technology, which is rapidly evolving. Artificial intelligence (AI), in particular, is reshaping higher education, creating both challenges and new opportunities.

AI continues to evolve faster than many institutional governance structures can adapt. We recommend that your institution ask these questions to help you adopt AI and manage technology disruptions strategically:

What AI investments will reduce structural costs and improve revenue predictability?
What financial implications arise from AI adoption or inaction?
Do our existing AI tools enhance or detract from cybersecurity and data-protection measures?

At the same time, institutions must address the declining perceived value proposition of higher education. Ask:

Is the financial value clearly articulated to prospective students, parents, and families?
What do prospective students see as the true value of their degree?
Can the market handle tuition increases or discount decreases? Can programs be demand-priced?
With AI predicted to reshape the workforce, how can we help students hedge against an uncertain future?

Successful institutions aren’t just adjusting their messaging. They’re reshaping their approach, assessing program portfolios, and strengthening outcomes reporting.

Slight Enrollment Gains May Mask Deeper Challenges

Enrollment data for the fall 2025 semester shows modest improvement. According to the National Student Clearinghouse Research Center, undergraduate enrollment for the semester increased 1.2% and certificate program enrollment rose 1.9%, while graduate enrollment decreased by 0.3%. International enrollment declined 1.4% overall, reflecting a 3.2% gain in international undergraduate enrollment but a 5.9% drop in graduate enrollment.

However, increased headcount isn’t necessarily translating into net tuition revenue growth. A jump in dual enrollment at community colleges and aggressive discounting across the higher education sector continue to depress net tuition revenue. This is particularly consequential for tuition-dependent private institutions.

Financial Stability Concerns Persist

Moody’s Ratings, Fitch Ratings, and S&P Global all issued negative sector outlooks for 2026. The factors they cited include:

Persistent enrollment pressure due to demographic changes
Rising operating costs
Increased uncertainty around federal and state funding
Changes to the student loan system
Volatility in international student policies
Weakening operating margins, especially among smaller, regional institutions

These ratings can influence borrowing capacity, covenant negotiations, and donor confidence.

The Continuing Trends of Mergers and Closures

The pace of institutional closures continues to accelerate. Approximately 138 nonprofit colleges closed or merged between 2016 and 2025, indicating an increase from historical trends. That includes around 16 nonprofit institutions in 2025 alone. While this is consistent with the prior year, there were fewer mergers and more closures in 2025.

Leaders should view continuous operating deficits as an early warning indicator requiring immediate action.

Endowment Draws Are Rising

Endowments remain a vital revenue source, funding approximately 66% of scholarships and academics, according to data from the 2024 NACUBO-Commonfund Study of Endowments. The report also found that in 2024:

Endowment draws increased 6.4% compared to the prior year
Private institutions reported an effective draw of 5.2%
Endowments contributed an average of 14.0% of institutions’ annual operating budgets, up 3.1% from 2023

When planning endowment strategy, higher education leaders should consider:

Uniform Prudent Management of Institutional Funds Act (UPMIFA) and state-specific adoption and donor protections, including investment standards, spending policies, delegation, and modification
Donor restrictions
Investment or liquidity restrictions
Level of financial literacy and understanding of the laws surrounding endowment

Leaders should also be wary of taking loans against the endowment and of increasing the endowment spending rate, both of which can be a slippery slope into financial distress.

Discount Rates Continue to Hit Record Highs

The NACUBO 2024 Discounting Study, which was released in June 2025, reported the following estimated average institutional discount rates in academic year 2024-25 among the institutions surveyed:

First-time, full-time, first-year students: 56.3%
All undergraduates: 51.4%

While discounting helps manage enrollment, it is eroding net tuition revenue and straining operating budgets. Institutions must increasingly tie financial aid strategies to data-driven demand modeling and mission-aligned pricing.

FAFSA Completion Trends Offer Hope

On the bright side, there has been a significant increase in FAFSA submissions for the 2026-27 aid year. Higher Ed Dive reported that:

High school seniors had completed 1.6 million FAFSA forms as of January 23, 2026—an increase of approximately 52% compared to the same date in 2025
The U.S. Department of Education had processed 7.6 million applications from all filers as of January 30, 2026

ED attributed the increases to a streamlined application process, earlier release of the form, and expanded support. Additionally, several states now require high school seniors to complete the FAFSA, leading to increased completion rates in those states.

However, flat Pell Grant maximums and major changes to federal loan programs—including the elimination of new Grad PLUS loans after July 2026—will have uneven implications across institutions, particularly those heavily reliant on graduate revenue.

Considerations and Opportunities for Christian Institutions

Christian colleges and universities have unique factors and considerations. Recent research from the North American Coalition for Christian Admissions Professionals (NACCAP), the Council for Christian Colleges and Universities (CCCU), and JM Partner Solutions found that:

Word of mouth is important – 70% of students surveyed first heard about Christian colleges through peers
Students research institutions passively and digitally long before institutions engage – 62% of inquiry-stage students said they used Google search, and 59% used the institution’s website to gather information
Parents remain highly influential in the decision process – 75% of inquiry students reporting that their parents are influential in where they enroll
Perceived cost is a deterrent – 50% of students viewed Christian institutions as too expensive, and 43% of students admitted to Christian institutions chose to attend another school
Affordability is a plus – 45% of enrolled students said they received more financial aid than they expected, and 58% reported that they received a better aid package from their Christian institution than other institutions offered
Confidence in outcomes is low – 91% of students surveyed said that preparing for a successful career or graduate school is very or extremely important to them, but only 26% said they strongly agreed that Christian institutions prepare students for this as well as non-religious institutions
Culture and community are key differentiators for Christian institutions – 61% of post-enrolled students said the faith-based culture was a key reason why they chose their institution, and 35% cited the sense of community
Lived faith builds trust – 70% of inquiry students said they want to attend a Christian institution with clear lifestyle expectations
There are generational differences in giving – 17% of younger alumni reported donating to their institution, compared with 60% of older alumni

Program Trends: Aligning Academic Portfolios with Market Demand

Labor market insights point toward growing demand in specific fields. According to Hanover Research, the top five fastest-growing careers that require a bachelor’s or master’s degree are:

Nurse practitioner
Data scientist
Information security analyst
Medical and health services manager
Physician assistant

Institutions reviewing academic portfolios should integrate market forecasting, cost modeling, and mission considerations to ensure program relevance and sustainability.

Continued Pressure from Inflation and Salaries

The Commonfund Higher Education Price Index (HEPI), a measure of inflation specific to higher education institutions, shows that the price of items in educational operating budgets increased 3.6% in fiscal year 2025, while inflation in the general economy increased 2.6%.

The HEPI also found that the faculty salary inflation rate was 4.3% in fiscal year 2025, the highest rate since Commonfund began tracking it in 1998. Given that labor costs account for the largest share of institutional expenses, wage pressure will remain a significant budgetary challenge for many institutions.

One Big Beautiful Bill Act: Higher Education Implications

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, includes significant changes and considerations for higher education institutions.

Federal Student Aid and Loan Changes

Pell Grants

The maximum Pell Grant remains fixed at $7,395 for four consecutive award years (2023–24 through 2026–27). While this provides short-term predictability, the lack of inflation adjustment effectively reduces the grant’s purchasing power over time, potentially increasing unmet financial need for low-income students.

Undergraduate and Graduate Loans

The OBBBA maintains annual subsidized loan limits of $3,500, $4,500, and $5,500 for undergraduate students. Unsubsidized loan eligibility expands by:

$2,000 for dependent students
$6,000 – $7,000 for independent students, depending on enrollment status

New lifetime caps are introduced for unsubsidized loans as of July 1, 2026:

$100,000 for graduate students
$200,000 for professional students (note that the government has not defined what programs are defined as “professional”)

In addition, no new Grad PLUS loans may be originated after July 1, 2026. Students enrolled prior to this date may continue borrowing for up to three additional years or until program completion, whichever comes first. Doctoral programs are expected to experience the most significant impact.

Enrollment-Based Loan Proration

Beginning July 1, 2026, federal student loans must be prorated for students enrolled between half-time and full-time. As a result, students enrolled less than full-time may no longer qualify for the full annual loan amount. This change may:

Increase outstanding student account balances
Shift payment timing toward institutions
Create additional pressure on institutional cash flow and collections

Institutions should anticipate higher levels of short-term receivables and consider adjustments to payment plans, outreach, and cash management strategies.

“Do No Harm” Accountability Metrics

New accountability metrics—commonly referred to as the “do no harm” framework—will apply starting with the 2029–30 award year. ED will evaluate programs based on post-completion earnings outcomes:

Undergraduate programs will be assessed by comparing the median earnings of graduates two years after completion to those of high school graduates without degrees.
Graduate programs will be evaluated against the median earnings of individuals holding comparable bachelor’s degrees.

Programs deemed not economically advantageous risk losing Title IV eligibility. Certain programs may face structural disadvantages under these metrics. For example, theological or ministry-related programs often lead to employment that includes a housing allowance, which is excluded from taxable wages (Form W-2, Box 1). Because this allowance is not reflected in reported earnings, graduates’ median wages may appear artificially low when compared to national averages, increasing the risk of failing the earnings premium test.

Differing Demographic Changes

Institutions have been aware of the coming “demographic cliff” for several years. The reduction in birth rates stemming from the 2008 – 2009 financial crisis is projected to reduce the number of first-year college students by up to 15% starting in 2025.

Demographic changes vary by region, however. In Knocking at the College Door: Projections of High School Graduates, the Western Interstate Commission for Higher Education (WICHE) noted that 38 states are expected to see a decline in the total number of graduates by 2041, with the South experiencing a slight increase:

U.S. Region	Projected Change in High School Graduates, 2023 – 2041
Midwest	-16%
Northeast	-17%
South	+3%
West	-20%

The WICHE report also noted that the proportion of students from underrepresented racial and ethnic backgrounds, particularly students who identify as Hispanic or multi-racial, will continue to increase.

Strategic Steps for 2026 and Beyond

Given these converging trends, we recommend that institutions prioritize:

Mission-aligned financial modeling that integrates program viability, enrollment projections, and capital needs
Data-driven enrollment strategies, including analytics-based discounting and targeted retention initiatives
Scenario planning for federal aid changes and demographic shifts
Technology and AI investments tied to measurable operational efficiencies
Strengthened governance and risk oversight, especially in cybersecurity and compliance
Fresh articulation of value, highlighting outcomes, affordability, and distinctive mission elements
Modeling the financial impact of loan proration on student success and institutional cash flow

Institutions that adapt with clarity, discipline, and innovation will be better positioned to weather the turbulence and emerge stronger and more resilient.

Authors:

Rachel McMichael, Partner, CRI Advisors, LLC^† | Partner, CRI Capin Crouse Advisors, LLC^† | Partner, Capin Crouse, LLC*
Junice Jones, Partner, CRI Advisors, LLC^† | Partner, CRI Capin Crouse Advisors, LLC^† | Partner, Capin Crouse, LLC*

Additional Resources:

The Changing Private Higher Education Risk Landscape

Higher Education Liquidity: How to Fund Your Mission During an Era of Financial Uncertainty

One Big Beautiful Bill Act Changes That Will Impact Student Cash Flow

Christian College Market Profile 2025 from the Center for Academic Faithfulness & Flourishing (sponsored by CapinCrouse)