March 8, 2026
440 US Colleges At Risk Of Bankruptcy
The article highlights the growing financial crisis facing many colleges and universities across North America as declining enrollment, demographic shifts, rising operating costs, and increasing skepticism about the value of higher education place unprecedented pressure on institutional finances. As revenues fall, many schools are cutting programs, laying off staff, merging with other institutions, or closing altogether. In the most severe cases, institutions are turning to donor-restricted endowment funds to cover day-to-day operating expenses, raising significant legal, ethical, and governance concerns.
The financial strain is creating a new class of victims: donors who contributed money for specific purposes such as scholarships, academic programs, or research. Rather than using these funds as intended, some institutions have allegedly redirected restricted endowment assets to keep their operations afloat. This has resulted in lawsuits, attorney general investigations, weakened internal controls, and growing calls for stronger donor protections. Experts warn that as more colleges face financial distress, disputes over restricted funds are likely to become increasingly common.
The article also illustrates how financial distress often develops gradually. Institutions typically exhaust unrestricted reserves, seek additional fundraising, ask donors to remove gift restrictions, and eventually begin searching for legal or administrative mechanisms to access restricted funds. While some colleges have obtained donor permission to repurpose funds, others have faced allegations of bypassing proper approvals, exposing trustees and senior leadership to significant fiduciary, legal, and reputational risks.
Underlying these challenges is a broader affordability crisis in higher education. Rising tuition, increasing student debt, uncertain employment outcomes for graduates, and shrinking student populations have fundamentally altered the economics of many institutions. The article argues that many boards have delayed difficult restructuring decisions in hopes that financial conditions would improve, only to find themselves confronting even greater financial instability, governance failures, and, in some cases, institutional closure.
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ARTICLE SOURCE : https://www.wsj.com/us-news/education/colleges-restricted-endowments-financial-trouble-247c7d3c?st=QzvcKp