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Private College Mergers: Should Private Colleges Join Together as a University?

By Michael K. Townsley

Thursday, August 14, 2025

This blog examines whether private college mergers could be structured to create a unified university that maintains academic quality while ensuring financial stability. The goal is to outline a model in which formerly independent tuition-dependent colleges combine into one corporate entity, creating economies of scale, greater marketing reach, and stronger reserves — all while offering students a credible degree at a reasonable price.

Understand the Hurdles: Why Mergers are Challenging

Higher education mergers between private institutions are becoming more common, but they follow a pattern of a strong college taking over a financially weak college. The question is why this pattern is prevalent. The answer is both complex and straightforward. It is simple because a higher education merger challenges financial integration. Higher education has entered a period where the financial reserves of many private colleges have become insufficient to sustain operations. If they want to retain some semblance of their history and contribution to higher education, they must find a wealthy partner with whom they can merge and gain shelter from the forces that drove them into penury. The answer is complex, and economic theory explains it best:

  1. Despite economic conditions, there are no owners who can gain a benefit from a merger
  2. Mergers involve the integration of complex policies, procedures, faculty, administrators, and non-professional employees, students, athletic programs, along with assets and liabilities of the two parties.
  3. Mergers between a strong partner and the takeover of a financially weak party also involve the problem of sorting out ownership and debt financing.
  4. Mergers also carry with them the challenge of convincing donors, alumni, and local government officials to accept the merger.

The biggest hurdle is the lack of incentives and the high cost of aligning academic programs, operational policies, and compliance standards.

Risks to the Survival of Private Colleges

For many small private colleges, the future is uncertain due to:

  1. Demographic Cliff in Higher Education – the student pool is projected to shrink between 16% and 29% across the country for the next fifteen years. Many tuition-dependent private colleges will not be able to survive this calamitous decline in the student pool.
  2. Unfunded Institutional Aid – in 2023[1], 51% of the 163 private colleges with less than 2,000 FTE, which discounted tuition by more than 50%, were in deep financial distress.[2] As unfunded tuition discounts increase, the amount of cash that flows from tuition revenue declines proportionately.
  3. The Federal government is proposing massive reductions in Pell grants and may make it nearly impossible for part-time students to remain eligible.
  4. These three conditions may well drive tuition-dependent colleges with enrollments greater than 50% into financial distress over the next fifteen years.

Combined, these trends could push many colleges toward closure unless they find structural solutions — like merging into a larger university model.

Why a University Made Up of Private Colleges Could Survive – University Consolidation:

  1. By producing an economy of scale that is not available to the individual college;
  2. By eliminating duplicate expenses and concentrating expenses in the university;
  3. By having larger budgets for marketing;
  4. By having larger financial reserves available to create a buffer against unplanned contingencies and delays in the opening of the university.
  5. By having the funds to invest in the best technology for instruction and administration.

Standards and Compliance: Things to Note

The university should set up a standards and compliance office to ensure that the institution provides a college degree at a reasonable price by minimizing operational costs while complying with legal and accrediting standards and while operating within institutional policies and procedures. The office would be responsible for these matters.

  1. Internal financial audits that oversee compliance with financial policies, procedures, and provide the board, president, and chief financial officer with regular compliance reports citing problems and offering solutions;
  2. Cost performance that analyzes the cost of operation for all aspects of the university, including plant and grounds, and files regular reports with recommendations on how to improve cost efficiency and provide private college financial stability.
  3. Operational standards that will oversee compliance with the policies and procedures of the university and file reports on compliance issues with recommendations to improve performance.
  4. Academic oversight that reviews academic operations, such as class schedules, instructional performance, student outcomes, and all other matters that delineate if students meet graduation standards. These reviews will be regular filed the president, board of trustees, and chief academic officer.

[1] The last year that IPEDS data was available on unfunded financial aid.;

[2] Source: IPEDS data for 2023.