In September 2016, economics professor Matthew Hendricks and some 3,000 other employees at the University of Tulsa received a disturbing email from the administration. The small private research university would no longer be funding its retirement plan and 43 staff members would lose their jobs. Hendricks, who taught econometrics with a specialty in education, was perplexed as to why the well-endowed college was taking these seemingly drastic measures. With an enrollment of only 4,500, at the time, the Oklahoma college’s $1 billion-plus endowment (much of it courtesy of a single generous one wildcat oilman), should have put the school on solid footing financially.
So Hendricks, who was tenured (therefore unfireable) decided to investigate how his employer could have run up a $26 million budget deficit. Like many other small colleges with grand ambitions, University of Tulsa’s leadership under its “Embrace The Future” plan of 2010, had embarked on bold expansion, including upgrading their athletic program to “D-1” (the top level), a football stadium renovation, new dorms and a 70,000 square foot performing arts center.
“We were like double the number of staff in all these other areas that have nothing to do with teaching,” says Hendricks, “We had a whole in-house marketing team, that was 20 people. We had 30 full-time police officers, a massive grounds crew and a library that had a huge staff, maybe 20 people. We did our food service internally, which is generally a terrible idea.”
Inept university management prompted Perspective Data Science’s founder Dr. Matthew Hendricks to ditch teaching to launch an AI-enhanced forensic accounting startup trained on higher ed.
M.Hendricks
Hendricks had drilled down into the audited financial results and compared Tulsa to its peer colleges. Then, in April 2019, Tulsa’s new president, Dr. Gerard Clancy, announced a turnaround plan dubbed “True Commitment.” It called for eliminating more than 80 academic programs, mostly in the humanities and arts, refocusing on STEM and pre-professional studies like health, business and law.
“It was the worst possible idea,” says Hendricks, “ The plan itself didn’t even make clear how it was going to save any money because there was nothing in it about firing faculty or anything like that.“ So Hendricks started giving presentations on campus that laid bare his employer’s gross fiscal mismanagement relative to its peers, and was even featured on a local radio show. The school’s CFO vigorously rebutted Hendrick’s findings but then hired a consulting firm that came to the same conclusions. Less than a year after Clancy bannounced his makeover plan, he and its provost received a no-confidence vote. A few months later in January 2020, Clancy resigned. The University of Tulsa, has since gone through another president and it recently announced attorney Stacy Leeds, a member of the Cherokee nation and former dean of Arizona State’s law school would take over as of July 1. Given the school’s struggles to maintain its enrollment, and perennial operating losses, she faces an uphill battle.
The University of Tulsa’s woes are not uncommon among the nation’s 900-plus private-not-for-profit colleges and universities which Forbes analyzes and grades each year for financial health. This year marks the beginning of a long predicted reduction of high school graduates, stemming back to a drop in birthrates during the great recession in 2008 leading to a 13% drop in potential new freshmen. That demographic cliff is occurring at the same time the Department of Education’s data is showing that students from middle income families, facing the stresses of rising prices, are opting out of expensive private colleges where tuition can be as high as $75,000 alone, in favor of cheaper public colleges, or are foregoing college altogether. This, plus new limits imposed by Trump’s One Big Beautiful Bill Act capping annual per student Parent-Plus loans to $20,000, and a near 20% drop in international student enrollment, is creating an impossible challenge for college administrators, most of whom have little experience in fiscal management, let alone turnaround strategies.
Of the 928 private colleges with 500 or more students analyzed by Forbes, more than 25% received our lowest grade of D, the worst performance since we began assessing financial health in 2013. Nearly half of the schools we analyzed got grades of C or worse. At the same time elite, highly selective colleges, like the members of the Ivy League and Forbes New Ivies continued to show strength. More than 100 schools or 11%, from Pomona College in California to Harvard, MIT and St. Olaf College in Minnesota, earned the highest possible financial grade of A+.
See the full ranking of College Financial Grades
Economist Hendricks’ work analyzing the University of Tulsa’s finances was so revealing and predictive that he soon began offering to apply his financial dashboard to any school that asked for it.
“I was actually shocked to see some of the other schools that were much worse off than TU,” says Hendricks, 44, who at first offered his software for free to faculty and alumni at colleges including St. Xavier University in Chicago (B-) and Mills College in Oakland, CA (which was acquired by Boston’s Northeastern University in 2022).
With demand for his software growing, especially among top consulting firms with higher education practices, Hendricks quit his professor job at Tulsa at the end of 2022, and self-funded a startup out of his garage called Perspective Data Science to analyze the finances of private colleges and universities. By then he had harnessed Alibaba’s open-source AI platform Qwen and trained it on college specific audited financial statements and other data, which can now scrape in real time.
One of the key metrics Perspective Data Science focuses on, especially for middling tuition dependent colleges, is called UNAEP or Unrestricted Net Assets Exclusive of Plant. It’s a measure of liquidity designed to show how much money a college actually has available each year to cover its expenses by removing illiquid items like dorms or academic buildings net of the debt associated with them. These assets are largely independent of donor funds, which ordinarily cannot be spent on operations because they are typically earmarked for specific academic programs. Forbes analysis using three years of Hendricks data, reveals that 192 private colleges are currently operating with negative UNAEPs. Many are essentially insolvent, drawing down credit or dipping into their donor restricted funds in order to make payroll and keep the lights on.
Take Massachusetts’ progressive liberal arts bastion Hampshire College, which gets a D on our Financial Grades. After 60 years, producing distinguished alumni like Ken Burns, Michael Pollan and Lupita Nyongo, it recently announced it would cease operations at the end of 2026. Its UNAEP turned negative to the tune of $9 million in 2024, as it reported chronic annual operating losses and struggled to meet its $21 million in bond debt. Beginning in 2021, its audited financial statements reveal it was using between 17% and 29% of its depleted $26 million endowment per year to help cover operating expenses and debt, even though most colleges normally limit endowment appropriations to 5% or less per year. (Under the Uniform Prudent Management of Institutional Funds Act (UPMIFA), any appropriation in excess of 7% is deemed imprudent, and could be subject to investigation by the state attorney general).
For at least the last decade the University of Tulsa has been running operating losses and a negative UNAEP, which amounted to negative $87 million in 2025. However, thanks to its $1.3 billion oil money funded endowment, which amounts to an impressive $368,000 per full time student, Tulsa can continue to live beyond its means, dipping into its donor funds, for another decade or more. Tulsa’s enrollment has been in steady decline, falling from 4,172 in 2020 to 3,475 last year, but thanks largely to the oil money in its coffers Forbes rates Tulsa a B+ for financial health.
The epidemic of insolvency spending going on at private colleges has caused Forbes to revamp its financial grading methodology. With help from Hendrick’s Perspective Data Science, Forbes has calculated the ratio of 3-year average UNAEP to expenses and added it to our 10 factor grading system. It now gets our highest weighting of 15%, equal to the level we give endowment assets per full time student. The measure helps identify which schools are operating soundly, and which are more likely to be burning through their endowments like profligate zombies. (See how we calculate the grades)
No less than 192 of the schools on our list report negative 3-year average UNAEP to expenses ratios. Most are small schools, located outside of major cities, like the D-graded institutions on the table below. [See Table of 20 Colleges On The Brink] But there are also some well-known schools with negative UNAEPs including Bennington College (C-) in Vermont, Washington DC’s Howard University (B), plus New York City’s Yeshiva (C-) and Pace Universities (D).
“If that number is negative and an institution is losing money, they basically have already sort of run out of runway” says Rebeka Mazzone, of FuturEDFinance, a Providence, RI consulting firm that works with university presidents on turnaround strategies. “It implies that you’re borrowing money from somewhere that you have no ability to pay back. If it is a line of credit at some point it becomes fully drawn. It could be that you did not deposit $10 million of donor funds into your endowment.”
Take the case of Loras College, a Catholic university in Dubuque, Iowa founded in 1839 with an undergraduate enrollment of 1,151. Its homepage invites prospective students to “be a part of a community that thrives on authenticity, radiates warmth, and upholds unwavering integrity.” Despite its growing negative UNAEP, which hit -$51 million in 2025 up from -$33 million a year prior, declining enrollment, years of operating losses, and a recent debt default with its lender MidWestOne, its management dismisses so-called “going concern” risks in its most recent audited financial statements. University leadership intends to borrow no less than $42 million from its $60 million endowment (a full 70%) in fiscal 2026, which it hopes to replenish by aggressive fundraising from donors and cost cutting.
“It’s ridiculous,” says Mazzone, a former auditor and school CFO. “They can’t fundraise their way out of this. I can’t believe they are taking in new students. The board should be sued.”
Another institution plundering its endowment for survival is D-graded Rider University in Lawrenceville, New Jersey, with 3,700 students and a near 80% acceptance rate. Already on financial probation with its accrediting agency, it recently fired 25% of its faculty, cut pay by 14% and agreed to sell 56-acres of its campus, including the president’s house, for $10 million.
Mazzone believes small colleges that have served local communities for generations will start closing at an increasingly rapid rate. Already a number of schools from last year’s list have thrown in the towel. Gone from our rankings are Eastern Nazarene College in Quincy Mass, Wisconsin’s Northland College, St. Andrews in North Carolina and Limestone University in South Carolina. All were shuttered for financial reasons.
If the market for higher education operated under normal free market conditions, one might expect a flurry of mergers, or a rollup of small and middling colleges. However, given the glut of colleges offering virtually the same product, and legally complicated non-profit governance structures, it’s often easier and less costly for surviving schools to simply absorb the students of colleges that will inevitably fail.
Some stronger schools like Northeastern University (B) have cleverly expanded their offerings via mergers with failing schools where they assume liabilities, but also gain endowment assets and real estate as they did in 2022 when they took over Mills College with its $250 million endowment and historic 125-acre Oakland, CA campus. Northeastern is executing the same playbook with its recently announced takeover of Marymount Manhattan College (D) to create Northeastern New York City. Nashville’s Vanderbilt University (A+) will take over the San Francisco campus of the troubled California College of the Arts’ (D) and its valuable real estate in 2027.
Unfortunately, there aren’t enough white knight institutions like Northeastern and Vanderbilt to save all the small colleges in need of rescuing. Moreover, according to Mazzone, by the time most college presidents grasp the problems of their institutions, it is often too late.
“It is not like this is a temporary problem,” says Mazzone, “We are in a long term sustained down market. Most college leadership is not skilled at what to do in a down market.”