For decades, the United States built an expansive higher-education system on the assumption of a steady pipeline of college-age students. That assumption is now coming apart: there are about to be fewer students to go around.

The country graduated a record 3.9 million high school students in 2025, but that peak marks a turning point. By 2041, the U.S. is projected to produce roughly 3.4 million high school graduates annually — a 13% decline — according to the Western Interstate Commission for Higher Education. The projection reflects the long shadow of the 2008–09 recession, after which birth rates fell sharply; children born in those years are now reaching college age, and no demographic rebound has followed large enough to replace them.

The effects are already visible. Colleges are competing harder for the students who remain, and admissions offices are finding it harder to predict which accepted applicants will actually enroll. Students using the Common App applied to an average of 6.56 colleges this admissions cycle, up from 6.37 a year earlier.

The intensified competition arrives as rising costs squeeze college budgets. For schools that lean heavily on tuition, an empty seat is lost revenue; for the most vulnerable institutions, enough empty seats can threaten survival.

"Nearly every college in the country is facing some kind of financial pressure," Robert Kelchen, a professor at the University of Tennessee, Knoxville, who studies higher education finance, told Fortune.

Closures and merger talk on the rise

Some institutions are disappearing altogether, while others are joining forces. The Federal Reserve Bank of Philadelphia estimated that 80 colleges could close between 2025 and 2029, adding to the more than 300 degree-granting institutions that have shut down since 2008.

Merger talks are increasingly part of the conversation: 31% of private nonprofit college presidents surveyed said their institutions had held serious discussions about a merger or acquisition, with financial stability the most commonly cited reason.

The traditional four-year path also faces growing competition. Enrollment at public two-year institutions focused on vocational programs grew nearly 20% between spring 2020 and spring 2025, according to the National Student Clearinghouse Research Center. Meanwhile, the price tag of a four-year degree is hard to ignore: annual sticker prices at dozens of U.S. colleges and universities — including tuition, housing, and other expenses — are now nearing or exceeding $100,000.

As careers in skilled trades become more attractive alternatives, fewer high school graduates go straight to college. The share enrolling immediately after graduation has fallen from 70% to 62% over the past decade. One scenario modeled in the education policy journal Education Next found that a 15% enrollment decline over five years would produce 23 additional college closures.

The business of filling a classroom

How badly a shrinking student population hurts a college depends largely on how much it depends on those students for revenue. For tuition-reliant schools, competing for students can itself erode the revenue each one brings in.

At private nonprofit colleges surveyed by the National Association of College and University Business Officers, nine in ten first-time undergraduates received institutional grant aid in 2025–26, and the estimated tuition discount rate for those students reached 57.1%. Schools are left in a bind: they need tuition revenue, but charging closer to the sticker price makes it harder to fill the seats that generate it.

"Students and their families know that they have more market power to negotiate financial aid, further affecting the bottom lines outside of a few dozen of the most prestigious universities," Kelchen said. Moving away from tuition discounting is often not feasible, he added, because "students will choose other colleges."

Institutions are trying to make that math work as their own bills climb. Inflation and health insurance costs are hitting colleges broadly, Kelchen noted. The Trump administration has added pressure through cuts to federal research funding and a crackdown on international students, who are particularly valuable to college budgets because they pay full tuition. During the key May-to-August visa processing period last year, the U.S. issued 36% fewer F-1 student visas than in the same period in 2024, according to State Department data analyzed by The Chronicle of Higher Education.

When the math stops working

Hampshire College illustrates the extreme end of the squeeze. The private liberal arts college in Amherst, Massachusetts, is set to end academic operations after the fall semester. It belongs to the so-called Five College consortium, which also includes Amherst College, Mount Holyoke College, Smith College, and the University of Massachusetts Amherst. Its closure is a stark warning that similarly vaunted schools could meet the same fate.

But a school does not need to be on the brink of closure to feel the same pressures. Syracuse University has a national brand and a $2.5 billion endowment, yet it fell short of its enrollment target this school year, contributing to a 1.5% budget shortfall, according to The Wall Street Journal. International enrollment had fallen by half amid the Trump administration's crackdown on student visas, and the university took on $458 million in debt last year to build new dorms.

Kelchen said Syracuse is being hit by many of the forces affecting the broader industry, but it is more vulnerable than some peers because it sits outside a major city or typical college town, in a cold region with a declining number of high school graduates.

Even a sizable endowment does not guarantee safety, as many colleges are essentially house rich and cash poor. "Colleges may have assets, but they are in their buildings or restricted endowment funds that they cannot use for daily operations," Kelchen said.

Although barred from directly drawing down those funds, nearly 200 private colleges borrowed from restricted endowment funds in 2025, up from about 130 in 2021, according to estimates from higher-ed consulting firm Perspective Data Science.

Running out of cash on hand is the clearest indicator that a college is at high risk of closure, Kelchen added, while consistent operating losses, enrollment declines, and large endowment withdrawals can also signal distress. He expects an uptick in closures rather than a massive wave, with schools in rural parts of the Northeast and Midwest facing particularly strong headwinds. For the colleges that survive, the result may be becoming smaller institutions than they ever expected to be.

This story was originally featured on Fortune.com.