An article fromS&P: Despite enrollment gains, margins have worsened at colleges

The credit ratings agency found increases in median headcounts across colleges it rates, but also weakening operating margins in fiscal 2025.

Published July 15, 2026Ben Unglesbee Senior Reporter

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• Despite enrollment growth at public and private colleges in fiscal 2025, both sectors saw their operating margins worsen, according to reports released this week by S&P Global Ratings.
• Public colleges’ 2.1% median enrollment growth of full-time-equivalent students outpaced the 0.7% increase at private colleges in fiscal 2025 across S&P’s portfolio of rated institutions
• The median operating margin across S&P’s 286 rated private institutions in fiscal 2025 was -0.4%, down from -0.3% the prior year. Public colleges showed healthier performances with a median operating margin of 0.7% across S&P’s 145 rated institutions in the sector, but that was still down slightly from 0.9% the prior year.

The impact:S&P analysts painted a picture of an improving landscape for public colleges. But disparities exist within the public sector. 

Prominent flagship, land-grant and some regional institutions have “maintained or improved their demand metrics,” S&P analysts said in the report. They also pointed to increases in fundraising, state appropriations and investment income that have helped offset inflation for most public colleges.

However, with some exceptions, smaller and more regional public colleges face greater competition and risk. 

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“Large flagship institutions with demand elasticity, sound resources, and excellent reputations remain well positioned despite emerging credit risks, while regional institutions with weaker demand and less financial flexibility contend with heightened pressures,” analysts said.

Meanwhile, the private nonprofits face numerous enrollment and fiscal challenges. Analysts pointed to “intensifying rivalry for new students” that has led to increasing tuition discounting. 

The context:Public colleges’ enrollment growth in fiscal 2025 was a full percentage point higher than the prior year’s 1.1% gain. Before fall 2023, the sector experienced six years of dwindling demand.

Private institutions’ more modest gains still represented an improvement over the 0.4% enrollment growth seen in fiscal 2024, according to S&P. But tuition discounting and rising costs led to worsening operating margins for that group.

By the numbers   21 The number of times S&P downgraded private colleges since June 2025, compared to only three that saw upgrades. Conversely, upgrades exceeded downgrades at public institutions, with nine versus three   3 Years in a row that median operating margins have been negative for private colleges, according to S&P   79.4% The median share of revenue generated from students at private nonprofits, according to S&P. The figure represents a diversification of revenue compared to the 84% share in 2020

What we’re watching: S&P analysts signaled that private colleges should brace for a return to enrollment declines amid other challenges, including federal policy shifts like new student loan restrictions. While the affordability of public institutions for in-state students gives them a competitive advantage, according to analysts, they face many of the same policy challenges, while public funding could come under pressure amid state budget constraints. 

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