For months, college and university lobbyists and other experts have warned of the financial blow that institutions could face when new loan limits and accountability measures take effect this summer.
But a new study shows that many public colleges and state university systems have been on shaky financial ground, which should have been sounding off alarms well before Congress’s higher ed overhaul in the One Big Beautiful Bill Act was signed into law.
“A point too often missed in conversations about OBBBA is how it lands on a sector already experiencing a high degree of financial fragility. That fragility wasn’t caused by OBBBA or by the current administration. But it will shape the outcome of any and all policy shifts for years to come,” Daniel Greenstein, chancellor emeritus of the Pennsylvania State System of Higher Education, wrote on LinkedIn about his research.
Among other changes, OBBBA will cap how much graduate students can borrow and require programs to show their graduates earn more than a high school graduate. Programs that fail the earnings test could lose access to federal student loans.
The study, conducted over the course of months and broken down in a series of blog posts, uses three different databases to run nearly 1,400 colleges from more than 80 systems through what Greenstein—who now works as chief of industry transformation at Ellucian, a higher ed tech company—calls a “stress test.” (Greenstein measures fragility based on a case-by-case scoring system. Each institution has a risk score and a maximum score. If the risk score is any more than 49 percent of the max score, it’s high risk. If it’s more than 68 percent, it’s critical risk.)
The first database, from which the quantitative analysis is pulled, includes stats from the Integrated Postsecondary Education Data System collected between 2010 and 2024. The second and third, curated by Greenstein with the help of artificial intelligence, document various strategies institutions have used to address their challenges and provide state profiles that capture the policy dynamics, funding models and political climates of higher education locally.
By combining all three databases, Greenstein was able to benchmark systems against one another, assess which are the most at risk versus which have demonstrated resilience and identify patterns across the groups.
The types of institutions facing the most “acute compound exposure,” Greenstein found, tended to be small historically Black colleges and universities as well as regional public institutions that serve master’s students. In other words, he said, the institutions hit hardest will be those with the most need for student financial aid.
State systems that tended to fare best, on the other hand, were not the largest. They were the ones with the strongest centralized governing bodies—boards that could evaluate state needs and then execute comprehensive action plans across all institutions. Those systems were also few in number. Only fourteen scored at a level indicative of structural resilience. Twenty-three, on the other hand, were high risk, and 37 met what Greenstein called the “critical mass threshold,” or a simultaneous deterioration in enrollment and operating margin.
Meanwhile, the correlation between level of state appropriations per student and system-level resilience was “approximately zero,” he added. “Increasing appropriations into a system without the governance architecture to deploy them strategically doesn’t buy resilience. It subsidizes fragility at a higher price.”
Inside Higher Ed spoke with Greenstein for a deeper look at these findings and more, and what steps college and system leaders can take in response. The conversation, edited for length and clarity, follows.
Q: So you say that OBBBA will affect an industry “already experiencing a high degree of financial fragility.” What do you mean by that, and why did you want to conduct this study in the first place?
A: The obvious one is enrollment decline. Across the sector—in systems as well as institutions—if you don’t have as many students coming in, you probably don’t have as much money coming in, and your revenues are probably declining at a rate which is faster. On top of that, your costs are going up. So that’s bad, and it’s happening in a lot of places. There’s a lot of ancillary stuff, but that’s one of the biggest predictive characteristics [of financial fragility].
So if you see the impacts of the Big Beautiful Bill—which is going to have an impact, for example, on graduate student enrollment—that’s going to just exacerbate that impact. You know, another one is that programs in the performance arts are going to get absolutely hammered by the [earnings test]. Those programs produce a small number of stellar superstars that the world knows about, but other people don’t do quite as well.
But all those things were there before the Big Beautiful Bill. The bill just exacerbates them. These are just evidence of fragility in overall financial constructs, and these exogenous shocks just are devastating.
And we’re 100 percent seeing this increasing fragility across the entire higher ed sector. The fragility is widespread and the level of risk is just high across sectors. It’s really only the private R-1s and the very well-endowed liberal arts colleges that are still fine, but the rest of the sector is in pretty bad shape.
Q: What did the results show you?
A: So, this is nuanced. At the institutional level, size just matters. There was a direct correlation between size—however you want to define it, operational size, expenditure, enrollment—and resilience. The bigger you are, the more resilient you are.
But when I began to dig into that, it became clear that it’s not just about size. It’s about the ability to manage your size well. So governance was a big deal there, too. Some of the most distressed systems are really big. The California State Universities are a stressed system. The State Universities of New York are a stressed system. They’re really big.
So it’s when you dig into what’s going on, that’s when you turn up the governance stuff. They actually either have weak governance authority or they have strong governance authority but aren’t executing it.
Q: So how exactly does governance and leadership and the authority that state law and policy have given to allow that governing body to have control influence financial fragility?
A: So the good news is leadership matters. It’s not all structurally determined—so, yay! There’s something you can do about it.
And I go back to my PASSHE experience. We had to change legislative authority to give the board the authority needed to do what it needed to [consolidate institutions and programs]. So even if you’re constrained by statute, there are paths to changing statutes to make [governing boards] more capable.
The findings of this report are my way of saying, “Look, folks, there’s a way out of here, but it’s going to be driven by difficult choices.” The good news is that those choices matter. The bad news is they’re going to be hard trade-off decisions.
My biggest question moving forward is, how do you use these data and insights to put them in leaders’ hands so they actually act on them before they get into real distress? The whole point of having all this information is to start waving flags at folks and saying, “Hey, come on. At least pay attention and think about where you’re going with all this, and do that before it becomes too late.”
Q: At Inside Higher Ed, we’ve seen conversations in states over whether to centralize control of their university system or systems. So your findings about the importance of governance track with the points of tension we’ve observed.
A: The trend now is to increase centralized coordination and put authority in the place where it needs to be to make hard or necessary decisions.
And it’s very challenging for systems, because there’s huge tension between the campuses—the members that want their autonomy and, frankly, should have a high degree of it, because they serve local communities—and the state office. But at the same time, you need a coordinating office to be able to say, in a policy-driven way, “Look, Campus X, you can’t just run over a cliff, because you’re going to hurt all of us.”
Q: You may be able to make predictions about how changes from OBBBA will affect different types of institutions, but since data about the impact has yet to be collected, let me ask, what impact—if any—has the Trump administration had on university finances so far that can be measured?
A: What does show up in the data as a direct result of the administration is the research funding. It’s the expenditure versus the research payout. Because university research budgets stayed the same, but the amount they received from the government was definitely impacted.
So you see places like the University of Chicago, Stanford, Duke, UConn, announcing these massive budget deficits. It’s because they’re endowment rich but cash poor.
You can also see the pressure on international students that has had a direct and very, very challenging impact.
But there is a system archetype that is most affected by these hits to research and international students. And that’s where the system includes one or more stellar, strong flagships, which really carry the rest of the schools. Maryland would be an example in College Park; the flagship’s strength masks at the system level all of the other weaknesses, which can be deep and profound.
As long as that flagship is strong—it’s got good research expenditure, good research revenue and has strong brand recognition—it’s good. But if that gets hit, those systems become really fragile real quick. And that’s what we’re seeing in the data.
Q: Your findings show that, across the board, public HBCUs and access-serving master’s institutions are most at risk. Why is that and what does it mean for the public?
A: HBCUs and MSIs—generally, four-year schools that have a high dependence on Pell-eligible students—are going to be impacted by anything that gets at the availability of funding for students in need.
They’re already very distressed, if you look at the HBCUs and MSIs generally. That said, they’re also remarkably resilient. I’ve written about this, too. They’re just very effective at managing with less. But this shock could be potentially very large. And if you combine this [OBBBA], with what happens if the government doesn’t fund the Pell shortfall, those schools are in trouble. (The Trump administration’s budget proposal does cover the Pell shortfall, though Congress has yet to sign off on the funding plan.)
I think you’re also going to see that problem at some of the schools which have already [been] experiencing enrollment declines. Think of regional publics, actually, PASSHE-type systems where they’ve got rural regional publics that are already pressured by the demographic cliff. You add a level of pressure because of availability of student funding. That’s not good.
Everyone’s going to experience a shock. The question is, how catastrophic is it going to be, and the pre-existing condition is going to have a role in shaping that.
Q: What can state legislatures and system leaders do to mitigate financial risk moving forward?
A: What is really frustrating and also gives me optimism is that for all of the challenges that we’re seeing, there are strategies for addressing them. They just need to be acted on, and they need to be acted on sooner rather than later. Time is not our friend, especially in the most nonresilient and most impacted areas.
Once you can diagnose the disease, you can find medical interventions that help. It’s the same thing here, and it’s not like we’re without models.
I have this database of state profiles. You can look across this database and see who’s doing what. What things work to improve transfer rates? What kind of funding formulas work to improve low-income student outcomes? You can look across that database and see what other systems are doing.
All in all, this isn’t going away. So when we think about solutions, we have to ask how we mobilize ourselves around interventions that look to be promising and put in place the capability at institutions and systems that need it and states that need it to make sure it happens.
Q: Does ensuring that we see more of this mobilization fall on the institutional leaders and the system leaders, or on the state lawmakers who direct the amount of authority that those individuals have?
A: I think this is what makes it so interesting and so complex. It’s all of the above. You’re going to need coordinated, aligned action on the part of legislatures, state boards, system boards and institutional presidents.
So in some ways, it’s everybody’s responsibility. But on the other hand, somebody—something—has to lead. The sponsors, the boards, the Legislature, they have to delegate authority to something or somebody and back them to drive these initiatives. It doesn’t happen without leadership, and leadership isn’t grasped, it’s delegated. That’s the complicated dance, and this is often why nothing happens until there’s a major crisis, because these ecosystems are so complex that delegation of authority or responsibility doesn’t actually happen until there’s a crisis.
