Shrinking high school classes force colleges to compete harder and consider mergers

The number of U.S. high school graduates is expected to fall 13% by 2041, from a record 3.9 million in 2025, according to a new projection. Colleges are already feeling the strain, with increased competition for students and financial pressures leading to closures and merger talks. The Federal Reserve Bank of Philadelphia estimates 80 colleges could close between 2025 and 2029.

The demographic decline follows decades of expansion built on steady enrollment. With the 2025 peak behind them, institutions face a shrinking applicant pool, and those relying heavily on tuition are most exposed. The Federal Reserve Bank of Philadelphia projects 80 closures by 2029, adding to over 300 since 2008.

In response, many schools are courting students with deeper financial aid — nine in ten first-time undergraduates at private nonprofits receive institutional grants, with discount rates reaching 57.1%. Meanwhile, vocational two-year programs grew nearly 20% since 2020, and immediate college enrollment fell from 70% to 62% over the past decade.