Much of higher education is under financial stress. Institutions are balancing shifting enrollment patterns, changing funding levels, and increasing costs. While the impact of these changes to the bottom line varies across sectors and the institutions within those sectors, the overall impact on the field is clear. Only 63% of nonprofit higher education institutions appeared financially healthy during the period analyzed in rpk GROUP’s recent report, The Financial Sustainability of Higher Education: Bright Spots & Challenges 2012 to 2022. This report offers a decade-long analysis of key financial sustainability indicators, as well as best practices for achieving long-term financial stability.
This blog series unpacks the report’s major insights, breaking them down into digestible discussions over five posts. This first post introduces the report, shares some key takeaways, and previews what’s ahead.
What’s in the Report?
At its core, this report examines how institutions are faring financially and what factors are shaping their future. It answers three big questions:
- How is the financial health of higher education changing over time?
- What factors should the industry focus on to deepen its understanding of financial health?
- What changes are needed to achieve financial sustainability over the long term?
The report draws on an analysis of a decade of financial health across 2,337 public and private nonprofit colleges and universities, offering a sector-wide perspective that can help higher education leaders, policymakers, and stakeholders navigate the evolving financial landscape.
Key Insights
- A Mixed Financial Picture: While some institutions have strengthened their financial footing, others—particularly small, tuition-dependent colleges—face growing instability.
- Pandemic Relief Was A Short-Term Fix: Federal stimulus funding helped many institutions weather the immediate storm, but with those funds gone, financial pressures are resurfacing.
- Enrollment Pressures Are Mounting: Declining student numbers are a reality, and the much-discussed ‘demographic cliff’ of 2025 is fast approaching.
- Revenue Diversification Is No Longer Optional: Institutions that diversify beyond tuition revenue—by leveraging state and local funding, private gifts, or alternative revenue streams—are more financially stable.
- Spending Trends Are Shifting: Per-student spending increased across all sectors, particularly in student services and administrative costs, raising questions about the long-term impact on affordability.
- Institutional Outcomes Are Improving: Despite financial challenges, degree production and efficiency have improved, countering the persistent narrative that higher education outcomes are stagnant.
Implications for Higher Education Leaders
rpk GROUP’s report emphasizes that financial sustainability is not just about balancing budgets—it’s about making strategic decisions that support institutional missions and student success. The report outlines several best practices for institutions seeking to strengthen their financial footing:
- Strategic Leadership – Strong leadership sets a shared future vision for a college or university that is grounded in the institution’s strengths and is responsive to the external environment.
- Data-informed Decision-making – Institutions must support a culture of data-informed decision making to drive strategic investments and the reallocation of existing resources.
- Market-Focused Insights – Externally focused institutions are better positioned to offset the coming decline in traditional college-age students through outreach to new groups of students. That outreach must involve a rethinking of programs and services to align with workforce needs.
- Student Retention – Retaining students is more cost-effective than additional recruitment, making support services and completion initiatives a priority.
- Optimized Academic Portfolios – Institutions should align program offerings with student and labor market demands for long-term viability.
- Administrative Efficiencies – Institutions can streamline operations, reduce redundancies, and leverage technology to help control costs.
- Strategic Partnerships – Collaborating with other institutions, businesses, and organizations can open new revenue opportunities and improve efficiencies.
This report provides a framework for higher education leaders to understand and improve the financial sustainability of their institutions, supporting continued investment in mission and success for all students.
What’s Next?
For a deeper dive into the data and insights shaping the future of higher education, download the full rpk GROUP report here.
Over the next few weeks, this blog series will take a closer look at the major sections of the report:
- Financial sustainability metrics
- Revenue and expense trends
- Faculty and staff patterns and trends
- Institutional outcomes
rpk will also host a webinar on Thursday, April 3 at 1pm ET (register here). During this webinar, rpk’s Rick Staisloff and Donna Desrochers will share key findings from the report. Later, they will engage in conversation with industry leaders, Terry Brown, Vice President for Academic Innovation and Transformation at American Association of State Colleges and Universities, and Ed Smith-Lewis, Senior Vice President, Strategic Partnerships and ICB at United Negro College Fund, on the financial sustainability of higher education and levers that impact financial sustainability at an institutional level.
