The educational landscape in the United States is changing rapidly, and for many small colleges and universities, the outlook is bleak. While large institutions may thrive, smaller liberal arts colleges have been facing mounting challenges that are pushing many toward closure. Over the last few decades, these colleges have played a pivotal role in fostering economic growth and stability in the small towns and cities where they are located. However, shifting demographics, rising operational costs, and other factors have combined to create a climate in which many schools are struggling to survive. What happens to the local economy when these institutions shut their doors?

National Trends in Higher Education of High-Profile Strikes

The seeds of the current crisis were planted years ago. Small colleges, especially private nonprofit institutions focused on liberal arts, reached peak enrollment in the early 2000s. Since then, however, a combination of factors has led to a decline in student numbers. A drop in national birth rates has resulted in fewer students entering college, meaning many institutions are now "right-sizing" for the available pool of applicants. The rising costs of education—both for students and the institutions themselves—are another factor contributing to the downturn. While students face record-high tuition and the prospect of accumulating significant debt, universities are grappling with inflation and operational costs that have soared over recent years.

In addition to these financial pressures, a shift in attitudes toward higher education is evident. Many members of the next generation are skeptical about the value of a degree. They are choosing to delay college, pursue alternative employment, or wait for the labor market to offer different opportunities. This trend was exacerbated by the COVID-19 pandemic, which interrupted the flow of adult learners returning to college and placed additional financial strain on smaller institutions.

Economic Losses from College Closures
A recent IMPLAN analysis from IMPLAN’s Vice President of Customer Success and Education Services, Candi Clouse, Ph.D., and Kristen Blazek, Ph.D., a research associate from Levin College at Cleveland State University shines a light on the way the recent surge of college closures impacts local economies.

Since 2022, 27 colleges across the U.S. have closed their doors, and the economic impact has been significant. States from Alabama to California and New Hampshire to Wisconsin have been affected, with 13 closures occurring in 2024 alone. Clouse and Blazek’s IMPLAN analysis reveals that the fallout includes the loss of nearly 7,200 jobs, $374 million in labor income, $543 million in contributions to GDP, and a staggering $848 million in total output. Even with the assumption that around half of the students from these closed institutions will transfer to other schools, the remaining economic losses are devastating for local communities.

What’s particularly concerning is that almost half of these economic losses occurred in 2024, signaling that the trend is accelerating. As these small liberal arts colleges shutter, they leave behind vacant buildings, disrupted communities, and students scrambling to find alternatives. The economic void left by these closures is substantial, often gutting local economies that relied heavily on the presence of the institution.

What does this mean for the future?

The future doesn’t hold much hope for reversing this trend. Already, nine colleges have announced their closures for 2025, spreading across eight states, including California, Delaware, Florida, and Pennsylvania. The projected losses for 2025 amount to over 2,300 jobs, $142 million in labor income, $202 million in contributions to GDP, and $307 million in total output.

On average, the closure of a single college leads to a loss of 265 jobs, $14 million in labor income, $21 million in GDP contributions, and $32 million in output. For many small towns, losing their college is like losing an economic engine. The surrounding businesses—cafes, bookstores, apartment rentals, and more—also feel the sting of decreased activity. This ripple effect can stunt economic growth in these communities for years to come.

The Path Forward

As small liberal arts colleges continue to close their doors, the question becomes: what can be done to mitigate the economic damage? For the communities affected, diversification of the local economy and attracting new industries may be key to recovery. However, the legacy of college closures will continue to be felt for years, impacting not only students and staff but also the broader economic ecosystem these institutions helped to sustain.

Understanding the full economic impact of college closures is critical for policymakers, educational institutions, and community leaders as they plan for the future. The detailed analysis by experts at IMPLAN provides insight into just how significant these losses can be and underscores the urgent need for strategic economic planning in areas facing potential closures.

As the higher education landscape shifts, staying informed about these trends will be essential for navigating the economic challenges that lie ahead.

Stay tuned for more insights and analysis from IMPLAN.