Tough Choices, Long-Term Vision: Colleges Navigate Financial Headwinds

Wofford College.Some of the reports are stark. Colleges and universities eliminate multiple positions. These are tough days; while campus leaders work to keep cuts away from instruction and the classroom as much as possible, even faculty are not immune to layoffs.

“Institutions are particularly focused on ensuring that changes in federal aid policy or financing options do not create new barriers to enrollment, persistence, or completion for low-income students and other financially vulnerable student populations,” says Bryan Dickson, director of education policy at National Association of College and University Business Officers (NACUBO).

Through careful planning and thoughtful strategies, higher education persists in its mission.

“It’s almost a cliché to say that every crisis creates opportunity, but I do think there’s value in asking, ‘What does this moment make possible that wasn’t possible before?’” says Dr. Su Jin Jez, CEO of California Competes, a nonpartisan research and policy organization focused on identifying solutions to California’s most critical higher education and workforce issues. “How should [states] reorganize higher education to best serve learners and the state’s future?”

Approaching the challenge from that perspective “shifts the focus from protecting institutional boundaries to strengthening the higher education ecosystem for shared prosperity,” she adds.

A Harsh Reality

In late June, Delaware County Community College eliminated 22 part-time counseling positions followed by 14 full-time positions. Faced with an approximately $16 million deficit, Santa Monica College announced layoffs of approximately 60 staff members as well as the elimination of vacant positions back in February.

Community college leaders in Texas told the state senate that they’re bracing for cuts, because the legislature did not budget for the level of success the institutions achieved under the state’s new outcome-based formula, costing the institutions millions of dollars in earned dollars. Instead, the Texas Higher Education Coordinating Board prorated the money each college would receive.

“[Texas community colleges] said it would be hard to sustain the student success investments the state is asking them to make,” says Dr. Everrett A. Smith, associate professor of higher education at the University of Cincinnati. He also notes that the state of New Jersey cut funding back to a level not seen in almost 20 years. Community colleges around the country are going to have to make significant decisions around how funds are designated, likely investing more heavily in workforce programs.

Dr. Pam Eddinger, president of Bunker Hill Community College (BHCC) in Massachusetts and chair of the American Association of Colleges and Universities board of directors, says it is essential to keep reductions in direct services at a minimum.

“We now know the importance of wraparound services,” she explains. “Services like tutoring, advising, personal counseling, food security, health and housing are no longer options—these are all academic support and social safety net elements that stabilize a life to make learning possible.”

Plugging Many Holes

Still, costs are outpacing revenue and federal accountability measures are leading to reduced federal funding. There are significant changes to federal student aid, including new borrowing limits and changes to graduate and Parent PLUS loans. “In response, many campuses are reassessing how they package institutional aid, advise students about financing options and identify where students may face new affordability gaps,” says Dickson.

Some institutions are experiencing loss of revenue due to an overall 17% decline in international student enrollment, notes Ajah Hawley-Alexander, clinical lecturer in the Media & Strategic Communication department at Iona University in New Rochelle, NY and a doctoral student. “International students frequently pay full tuition, making them an important source of net tuition revenue,” says Hawley-Alexander. “Those revenues help sustain faculty positions, academic programs, student services, research initiatives and institutional financial aid for domestic students.”

Smith also notes the loss in international enrollment for four-year institutions. “The challenge for four-year institutions is threefold in my opinion: state appropriation, what is going to be done about research and research recovery, and then what is to be done about international enrollment,” he says. “This is about fiscal policy management and working with public agencies … because public universities, especially as far as gift agreements and philanthropy, can’t have any DEI language in gift agreements.”

Wofford College, a private liberal arts school in South Carolina, has not experienced a lot of direct impact — the college’s federal grant activity has been relatively low over the past few years, and the international student population is small — but it still feels a squeeze.

“The impacts, from my perspective, are a little more along the overall impacts to the industry,” says Wofford’s chief financial officer, Christopher L. Gardner. “It would be unreasonable for me to think that the broader conversation about higher education isn’t impacting how our families, our students, our prospective students and their families are thinking about higher ed generally and therefore how they’re assessing and evaluating Wofford.”

Making Things Work

Eddinger says BHCC utilizes a traditional and conservative budget management strategy. “We insist on a flat organization and continuously seek organizational strategy,” she says. A flat organization has little middle management and a modest number of administrators at the senior level.

“Advancing student success isn’t just about making thoughtful budget decisions; it’s also about maximizing the investments California has already made to support learners,” says Jez. “The state has invested significantly in financial aid, basic needs, workforce development and public benefits. In a constrained fiscal environment, one of the biggest opportunities is making those investments work better together.”

For example, California recently expanded CalFresh eligibility for college students. Also, California Competes leads the statewide coalition, California ASPIRES, which works to better connect higher education with the broader network of public supports, including nutrition assistance, workforce programs and other services. This enables students to more easily access the resources for which they are eligible.

More collaborative budgeting going forward will help ensure allocations reflect institutional priorities, leaders say. “Where you have measurable goals and performance-informed allocations, you can make better decisions for who to let go or where to freeze,” Smith says. “If you include academic leaders in the process and also make sure that voices are being heard and that we’re catching blind spots in the way that we cut, it will be better. … Also, giving departments their autonomy to say what is a priority and what can be paused for now.”

Dr. Taylor Odle, assistant professor of educational policy studies at the University of Wisconsin-Madison, says while there are challenges everywhere in higher education, he is not seeing extreme disruption at Research 1 institutions. “Everyone’s problems are significant, but they are also relative or in context,” he explains. “What I’m seeing a little in the R1 space is not necessarily a cut, but a strategic redirection. The federal research landscape is a great example.”

While there have been cuts, Odle says National Science Foundation (NSF) and National Institutes of Health (NIH) money still exists. The University of Wisconsin-Madison is undergoing a restructuring of the office of the Vice Chancellor for Research to change its approach to securing grant funding.

“We are taking steps to ensure that we remain competitive in the federal grant landscape that still does exist,” he says. “A lot of that means prioritizing competition and resources that go into those STEM grants. It might feel like a cut in some areas, but it could actually represent an escalation of spending.”

Keeping Student Success Foremost

“Many colleges and universities are approaching difficult financial decisions through strategic prioritization, carefully evaluating where resources can have the greatest impact,” says Dickson. “Many focus on protecting investments that are most closely tied to student success and institutional mission while looking for efficiencies in operations, technology and administrative processes.”

BHCC maintains a reserve while also continuing to innovate and grow programs that meet employer and societal needs. Each year, $1.5 million goes into an innovation fund program. Departments propose projects, and the college supports those start-up projects with potential. “Lastly, we review our programs on a cycle to make sure they are relevant and updated,” says Eddinger. “This is an important task to ensure that program enrollment remains vibrant.”

Jez says that even in a constrained fiscal environment, institutions continue to invest where there is clear student and workforce demand. She cites the transition of Cal Poly Humboldt into a polytechnic university, which reflects the recognition that higher education investments should align with community, economic and workforce priorities.

“We’re also seeing increased collaboration across sectors to expand educational opportunities in regions where demand exceeds existing capacity,” Jez says. “An example is the Chula Vista partnership, where San Diego State University, the City of Chula Vista and the State of California are working together to bring university programs — including a new nursing program — to South San Diego County, a region that has limited access to higher education despite its growing population and workforce needs.”

Some cost-saving moves may be long overdue, such as a large university creating a centralized budget and finance office rather than having offices in its different colleges, says Odle. He has seen several R1 institutions accelerating the timeline of pre-existing institutional efforts to find operational efficiencies. “Higher education should always be looking for opportunities to improve our efficacy and efficiency at the same time,” he says.

Now is a time when institutions are making strategic spending increases in areas that can generate a high return, like artificial intelligence. “Playing the long game of what the new workforce is going to look like,” says Odle. The University of Wisconsin-Madison recently launched the College of Computing and Artificial Intelligence, which absorbed prior departments and required considerable investment.

Smith says in the short-term, workforce credentials, such as IT, healthcare and skilled trades, is a space for strategic investment. “We’re seeing more states lean in on this and not just for community colleges,” he says. “Four-year institutions are really ramping up their investment in short-term programs too. We’re seeing more conversations right now around what workforce development will look like if we make a longer-term investment in it.”

Gardner speaks of the collaborative culture at Wofford, noting the college’s past president built a leadership team that embodies mutual respect. “I’m not adjudicating or refereeing very often between different cabinet members who have competing needs,” he says. “It is a collaborative process when we talk about financial resources.”

Effective policy is essential to higher education. Smith says there must be experts who truly understand the work informing the decision makers. “The governance of higher education, not only at the state level, must work with federal leaders in this regard,” he explains.

Lois Elfman is an award-winning journalist whose work often focuses on higher education. She has examined complex contemporary issues, including gender equity, best practices for military veterans, innovative approaches to higher education, the enduring value of arts education, the impact of NIL of college sports, and LGBTQ inclusion. You can follow her on Twitter @LoisElfman.

This story originally ran in The EDU Ledger's September 3, 2026 edition. Subscribe here for full access.