Fitch Ratings has issued a “deteriorating” outlook for the US higher education (HE) sector in 2026, continuing a grim forecast first highlighted in 2025. Analysts cited a shrinking pipeline of students, rising costs, and uncertainty over state and federal support as major challenges for college finances, as quoted by the Higher Ed Dive.The forecast aligns Fitch with Moody’s Ratings and S&P Global Ratings, both of which have predicted a difficult year for HE, with S&P focusing specifically on nonprofit institutions. Rising expenses and shifting economic conditions are expected to put additional strain on colleges already facing competitive enrolment pressures.Shrinking student base and revenue pressuresAccording to Fitch, a decline in prospective students is likely to intensify financial pressures across the US HE sector. “This fragile pipeline will become another area of increasing competition for fewer students and may further erode any meaningful student fee revenue growth prospects for 2026 and beyond,” Fitch Senior Director Emily Wadhwani said in conversation with the Higher Ed Dive.High school graduate numbers are expected to peak this year, then decline in the coming years, leaving colleges to compete for a smaller domestic student population. The National Student Clearinghouse Research Center noted that while overall enrolment has recovered from pandemic-related drops, gains have been largely concentrated at two-year institutions offering certificate programmes and dual enrolment opportunities, as quoted by the Higher Ed Dive.Federal funding and international enrolment under pressureFitch’s report highlighted the uneven impact of federal policy on colleges. Changes to research funding and the massive US spending bill passed this summer were cited as factors increasing uncertainty. In addition, new federal lending limits for graduate programmes, set to take effect in July, could constrain pricing power for institutions heavily reliant on tuition revenue, as reported by the Higher Ed Dive.International student numbers are also expected to fall, particularly among graduate programmes. The US government under President Trump has expanded vetting processes and revoked visas for thousands of foreign students, tightening international enrolment. Colleges that rely on international tuition, often at full price, may see revenue growth diminish further, as quoted by the Higher Ed Dive.Mergers and closures expected to continueFitch analysts predict that the pace of mergers and college closures will remain elevated in 2026. Rising scrutiny over the value proposition of higher education degrees, combined with shrinking domestic and international enrolment, is likely to further pressure institutional finances, as quoted by the Higher Ed Dive.Overall, the US HE sector faces a challenging year ahead, with declining student numbers, rising costs, and uncertainty over federal support creating a precarious financial environment for colleges.
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