Higher education is changing, and Minnesota colleges and universities will have to change with it in order to survive.
Declining American birth rates have created a smaller pool of potential applicants, forcing colleges to compete at higher rates for students. The enrollment drop was steeper in Minnesota than in other states, and in 2022, total undergraduate enrollment in Minnesota had plunged to levels last seen in the late 1990s. In the last two years, enrollment has begun to bounce back.
A diploma is no longer considered a strong investment by the majority. A 2023 Wall Street Journal poll found that 56 percent of Americans think that a four-year degree is a bad bet. (Those adult respondents generally operated with the benefit of hindsight, of course, leaving it an open question as to how they’ll advise their children.)
At the same time, the federal government has put several fiscal loan safeguards in place. Last year’s One Big Beautiful Bill Act (OBBBA) shifted undergraduate loan options. Federal loans disbursed to undergraduates now count toward lifetime loan limits, and additional Parent PLUS loans (which are loans taken out with a cosigner) are capped at $20,000 per year. Theoretically, a student can now only receive a maximum of $25,500 in federal student loans per year.
The rules shifted for graduate programs, too. Graduate programs now have annual loan limits of $20,500, and lifetime loan limits of $100,000. Students enrolled in graduate programs designated as “professional” now have yearly limits of $50,000, and lifetime limits of $200,000.
While this will protect students and the country in the long run—federal student loan debt in the United States totals $1.814 trillion, and nearly half the student loan portfolio is currently in a nonpayment status — also puts pressure on colleges. Colleges must either lower tuition, raise scholarship disbursements, or attract wealthier students to make the final college bill payable for students.
Small schools who largely rely on yearly tuition revenue instead of an endowment were already struggling, and the new loan caps will increase the pressure. It’s possible that more than a quarter of the nation’s private colleges will either have to close or merge within the next 10 years.
Other federal actions make the financial picture even more complicated for institutions. The Trump administration has slashed research grant funding at many institutions, hobbling many science research departments that previously attracted and trained students. The administration has also approved 36 percent fewer visas this year for international students, who usually pay the entire sticker price of tuition. International students, paying far more than domestic students, bring in significant amounts of revenue for many institutions.
Federal actions may have created financial difficulties for institutions, but it’s important to remember that the changes to loans in particular have also created new dynamics for students. Lower tuition, capped in response to new loan requirements, (and consequently lower student debt) will give students a stronger start to their careers.
Students may have fewer higher ed options in ten years, but they will be options with proven strong qualities. Small, struggling schools often provide graduates with unanticipated high student debt and low salary outcomes.
Similarly, the new graduate loan caps won’t dissuade students from going to graduate school, but may cause them to choose slightly lower-ranked, lower-priced schools in response. As a result, lower-ranked, local graduate schools will be able to recruit stronger candidates. Elite “brain drain” will be less pronounced as top students, driven by reasonable financial constraints, choose to study and work closer to home. That shift could be a lifeline to local economies.
What about Minnesota?
Minnesota public colleges and universities are already benefiting from several programs designed to boost enrollment. Minnesota public colleges only require a high school diploma or equivalent for admission. Plus, public colleges and universities benefit from direct state funding, meaning that they are insulated in the short-term from enrollment changes.
The Minnesota Direct Admissions program gives qualifying seniors at participating high schools admission letters, without requiring previous application or stated interest. This program is designed to recruit students who may not believe that they’ll be admitted at certain institutions or who may not be aware of their postsecondary options. Over 50 Minnesota public and private universities and colleges participate.
The North Star Promise program guarantees state-funded full tuition at all Minnesota State colleges and universities to students from families with an AGI below $80,000, removing the need for student loans. My colleague Martha Njolomole has argued that the program unsustainably squeezes the state’s higher education budget.
The Minnesota State Grant program offers grants to students attending both private and public colleges in Minnesota, with 88,000 students scheduled to receive a grant in the 26-27 school year. This year, the Minnesota State Grant program unexpectedly pulled back promised funding from students, as lawmakers, asked to balance the budget, opted to prioritize the North Star Promise program.
Private Minnesota colleges and universities are at a competitive disadvantage in Minnesota; North Star Promise students can’t attend private institutions, and the Minnesota State Grant program appears to be permanently shrinking. But all is not lost. If Minnesota colleges and universities can provide strong education programs that entice new in-state and out-of-state students, they will be able to weather financial headwinds.
A new tool by the Hechinger Report that analyzes 38 Minnesota private and public colleges and universities can give onlookers some insight. The tool “allows users to research whether a particular college is showing financial warning signs: dropping enrollment, declining revenue, growing deficits and shrinking endowments. The tracker also includes data on faculty layoffs and cuts to academic programs, as well as accreditation decisions.”
Here’s what the tool reports for Minnesota’s five largest private universities:
University of St. Thomas was flagged for higher-than-average tuition revenue per-student decline (a 21 percent decrease from 2019 to 2024) and a 6 percent enrollment decline from 2019 to 2025. St. Thomas also increased their staff headcount by 5 percent from 2019 to 2024 and increased their endowment by an impressive 25 percent over the same time period.
Concordia University, Saint Paul showed strong growth on a shaky fiscal foundation, with overall revenue, enrollment, endowment and staff increasing almost 20 percent more than the average private school within the time period of either 2019-2024 or 2019-2025. However, Concordia is incredibly dependent on tuition for overall revenue, and the total number of international students increased 243 percent from 2019 to 2025, representing 10 percent of overall enrollment.
Saint Mary’s University of Minnesota showed signs of strain with an 18 percent enrollment decrease and a 57 percent international student enrollment decrease from 2019 to 2025. Staff also decreased 24 percent from 2019 to 2024. Positively, net tuition revenue increased 3 percent from 2019 to 2024, while most private universities saw a decrease during that same time period.
St. Catherine University has had shrinking enrollment (23 percent decrease), staffing levels (17 percent decrease), and net tuition revenue (15 percent decrease) within either the 2019-2024 or 2019-2025 time period, but there’s one bright spot. St. Catherine University’s endowment increased 36 percent from 2019 to 2024, leaving about $156 million in the bank.
Bethel University is currently on shaky but manageable financial ground. Net tuition revenue decreased 15 percent from 2019 to 2024, and the university ended the fiscal year with a total loss six times in the last ten years. Enrollment remained reasonably steady with a 3 percent decrease from 2019 to 2025, and only 0.7 percent of students at this college were international in 2025. A bit of good news: endowment increased 79 percent from 2019 to 2024
Interested readers can search for more schools, including public universities and colleges, by using the tool here.
As the federal government has signaled that federal aid will continue to be minimized, wise college administrators should plan accordingly. Community donors and investors will play an essential role in growing endowments, recruiting students, and ensuring job placements in local businesses.
Minnesota institutions should also shy away from tempting schemes that boost admission by recruiting students who may not have strong academic backgrounds, like test-optional admissions or automatic admission schemes with low bars for admission. It’s not rude or elitist for universities to require a high level of academic preparation, as students can always utilize Minnesota’s excellent community college system and then reapply.
A final college diploma isn’t worth anything on its own; it represents the promise of a highly trained mind. If universities admit students who aren’t yet ready for rigorous learning, they’ll ultimately devalue their degree. Students will drop out, spend extra years accruing extra debt, and possess weak skills that won’t impress the market.
The changing financial dynamics for Minnesota’s private schools give the institutions an opportunity to pare down what doesn’t matter and showcase truly excellent degree options.