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Commentary

More Colleges Are

Closing. It’s About

Time

The market for higher education isn’t failing,

but it’s taking an awfully long time to adjust.

By Roland Fryer

UTC-04:00

Hampshire College, alma mater of filmmaker

Ken Burns, announced in April that it will close

after the fall semester. Sterling College, a 130-

acre working farm in northeastern Vermont, will

graduate its final class in May. The Huron

Consulting Group projects that 442 private

nonprofit colleges enrolling roughly 670,000

students are at risk of closing or merging within

a decade. The instinctive response is elegiac:

lament the shuttered campus, mourn the futures

it might have made, hope for rescue. Mr. Burns

called Hampshire’s closing “an extraordinary

loss.”

Is it just me, or is this good news for America?

Closing these institutions means students are

slowly ceasing to overpay for scant added value.

If more market correction is to come, that tells us

something important—about higher education

and about other education sectors we have built

to avoid correction altogether. The question isn’t

how to save these institutions. It is how to

accelerate market forces.

The private-college sector didn’t rise in a laissez-

faire market. It was built by federal loan

programs, the postwar college wage premium

and decades of expanding demand. In that

environment, “more college seats” and “more

social value” came to mean the same thing. They

weren’t.

Tuition and fees have outpaced overall inflation

for decades, and the strain is no longer

theoretical. Robert Kelchen, a professor of

education at the University of Tennessee,Knoxville, found in his analysis of college

finance data for fiscal 2024 that 31% of private

nonprofit institutions posted losses. Moody’s

downgraded St. Michael’s College in Colchester,

Vt., to junk in 2022. This isn’t a story about the

demographic cliff. The trouble was here first.

The good news is the schools doing the most for

upward mobility aren’t the ones closing. A

mobility report card study shows that schools

such as California State University, Los Angeles

and Stony Brook University, on New York’s

Long Island, pair relatively high access for low-

income students with strong success rates,

producing mobility rates—the percentage of

students who come from the bottom fifth of the

income distribution and end up in the top fifth—

of 9.9% and 8.4% respectively. The costs are

wildly different: average annual cost on the

College Scorecard is $3,967 at Cal State Los

Angeles, $18,784 at Stony Brook and $25,239 at

St. Michael’s. The point isn’t that every private

college underperforms every public college. It is

that upward mobility is available, at scale,

outside the prestige hierarchy and often at much

lower prices.

Selectivity predicts selection. It doesn’t reliably

predict value for the typical student. The

foundational result in this literature is Stacy Dale

and Alan Krueger’s 1999 paper, which used a

matched-applicant design—comparing students

with others who applied to and were admitted by

the same set of colleges—and found that the

earnings premium from attending a more

selective school essentially vanishes. They did

find one notable exception: For black, Hispanic

and first-generation students from low-income

families, selectivity did predict higher earnings.

That heterogeneity isn’t what the defenders of

small private liberal-arts colleges are arguing

about. The schools that move minority and low-

income students into the labor-market premium

Ms. Dale and Mr. Krueger identified are more

akin to Princeton and Stanford, not Hampshire

and Sterling. A more recent paper by Jack

Mountjoy and Brent Hickman, using Texas

administrative earnings records, finds the same

thing with cleaner data and a more robust

identification strategy.

That doesn’t mean colleges are interchangeable.

It means that when weak private institutionscharge high prices while delivering little value,

the eventual enrollment loss and closing aren’t a

market failure. They are revealed preference

doing what it’s supposed to do. Recent analysis

of postsecondary enrollment trends finds exactly

this: The institutions losing students are

concentrated among the lowest-value-add

colleges.

A common objection is that earnings are too

narrow a measure. Many argue that college

produces transformation, citizenship, character—

things a wage record can’t capture. They’re right

that earnings aren’t everything. But they’re

wrong that the closing schools have any

comparative advantage in producing them. The

Gallup-Purdue Index, surveying more than

30,000 graduates on workplace engagement and

life satisfaction, finds that institutional type—

private vs. public, selective vs. not—explains

almost none of the variation. The same is true for

civic engagement, marriage and health.

None of this makes closing painless. A study

with the National Student Clearinghouse

Research Center finds that students who

experience a closing are 71% less likely to be

enrolled elsewhere after one month and 50% less

likely to complete a credential than matched

peers who didn’t experience a closing. On the

other side of the ledger sits a much larger pool of

future students who would otherwise spend tens

of thousands of dollars on a low-value education.

Keeping these institutions alive isn’t progressive

—it’s a transfer from poorly informed future

students to incumbent institutions.

This correction almost certainly won’t reach the

Ivy League. Researchers Raj Chetty, David

Deming and John Friedman find that “Ivy Plus”

admission has no significant effect on mean

income rank at age 33 but raises the probability

of reaching the top 1% of earnings by roughly

50%. That is a lottery ticket for which the prize

is a 40-year annuity at top-1% income. Discount

it at any reasonable rate, and the price of

admission looks like a bargain.

The interesting question isn’t the top of the

distribution. It is the vast tier in between—the

schools that are neither dying small private

institutions nor lottery-ticket Ivies. Markets

deliver competitive outcomes when buyers can

see what they are buying, when they can walksee what they are buying, when they can walk

away cheaply if they were wrong, and when they

update their views in light of new information.

The market for higher education is working on

all three counts—but slowly. Information is

buried, switching is costly, and teenagers don’t

automatically keep up on statistics about their

own futures. The closings we are witnessing are

a decade of accumulated student decisions

finally adding up.

Last month a first-generation college student

from Nebraska pitched me on a startup to fix

this. It was the 100th such pitch I’ve heard on the

subject in the past couple of years. My answer

was the same as the preceding 99: There are

already scores of consumer-facing apps in this

space and hundreds of digital tools across the

broader landscape, and students are still walking

into bad enrollment decisions. The information

exists. Artificial-intelligence chatbots are doling

out advice. What is missing, at scale, is the right

kind of conversation.

In a field experiment my team and I ran in

Houston in 2014, we put graduation rates,

postgraduation earnings and full cost in front of

high-school seniors at the moment they were

choosing where to apply. The numbers alone

didn’t move them much.

Information-only interventions across the

broader literature show the same pattern. The

information-only arm of Eric Bettinger’s H&R

Block FAFSA experiment and Kelli A. Bird’s

800,000-student text-messaging trial both

produced null effects at scale. In contrast,

economist Christine Mulhern’s 2023 paper finds

that individual high-school counselors have

causal effects on educational attainment

comparable in magnitude to teachers. We need

tools that do what a good counselor does, at the

scale a human counselor never could, with the

warmth a chatbot can’t yet accomplish.

We should do all we can to accelerate market

forces in higher education. The real scandal isn’t

that hundreds of colleges are in danger of closing

—it is that we have designed K-12 so that their

equivalents never will.

Mr. Fryer, a Journal contributor, is a professor

of economics at Harvard, a founder of Equal

Opportunity Ventures and a senior fellow at the

Manhattan Institute.