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Dive Brief:
Fitch Ratings on Thursday issued a “deteriorating” outlook for the higher education sector in 2026, continuing the gloomy prediction the agency issued for 2025.
Analysts based their forecast on a shrinking prospective student base, “rising uncertainty related to state and federal support, continued expense escalation and shifting economic conditions.”
With its report, Fitch joins Moody’s Ratings and S&P Global Ratings in predicting a grim year for higher ed — Moody’s for the sector overall and S&P for nonprofit colleges specifically.
Dive Insight:
Fitch’s report details a dour year for higher ed, but one that affects colleges unequally.
The shifting federal landscape, for example, will have “a wide but uneven impact on the sector,” the report said, citing possible changes to research funding and the Republicans’ massive spending bill that passed this summer. The analysts specifically pointed to new federal lending limits for graduate programs, set to take effect in July, which could limit colleges’ pricing power.
Fitch also expects international enrollment to falter. Preliminary surveys about fall 2025 enrollment have found colleges reporting a drop in international students, especially those enrolled in graduate programs.
International enrollment can be a financial boon to colleges, especially those heavily dependent on tuition revenue, as these students often pay full sticker price.
But under President Donald Trump, the federal government has repeatedly attacked foreign students, from expanding the vetting process to revoking their visas by the thousands. It has also moved to tighten international student visa programs.
“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,” the report said.
The number of high school graduates is expected to peak this year after years of growth, according to the Western Interstate Commission for Higher Education. In the coming years, the number of traditional-age college students is expected to drop, leaving colleges fighting for fewer attendees.
Overall enrollment in the sector has recovered from the pandemic, according to the National Student Clearinghouse Research Center.
But those gains have been largely concentrated at two-year institutions, according to Fitch. The report noted that these institutions offer increasingly popular certificate programs and dual enrollment, which allows students to take college courses while in high school. However, those options may not ultimately lead to more transfer students at four-year colleges, it said.
Amid these factors, colleges will face “strained revenue growth prospects,” according to Fitch Senior Director Emily Wadhwani.
“A vulnerable international student pipeline, a shrinking domestic student base and rising scrutiny on the value proposition of a higher education degree are likely to erode any meaningful student fee revenue growth prospects in the coming year,” Wadhwani said in the report.
The number of colleges merging or closing is expected to “continue at an elevated pace” in 2026, Fitch analysts said.
