Private colleges grew revenue last year — but not by enough, Fitch says

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Dive Snapshot:

Private colleges face a deteriorating outlook as inflation outpaces rising tuition revenue and institutions navigate myriad other operating challenges, according to a report Tuesday from Fitch Ratings.
In fiscal 2025, private colleges rated by Fitch had a median operating margin of -0.5%. Those margins were “strained as inflationary, labor and other expense pressures persisted,” Fitch analysts said in the report.
Along with cost increases, analysts pointed to demographic shifts, limited revenue growth, rising tuition discounts and an “adversarial federal policy environment.”

Higher ed impact: A key financial pain point for colleges is the unequal pace of revenue and cost growth. Fitch analysts explained margin struggles in terms of colleges’ inability to balance “structurally constrained revenues” with cost controls “in a sustainable way.”

Institutions that have fared best are those that don’t solely rely on tuition revenue and have diversified toward other channels such as investment returns, grants and healthcare operations.

Background: In December, Fitch issued a gloomy outlook for the entire higher education sector in 2026, pointing to economic and policy uncertainty. In its annual “median” report released this week, Fitch analysts looked at data across institutions in its ratings portfolio and put numbers to many of the fiscal challenges colleges face.

By the numbers

-0.5%

Median adjusted operating margin across Fitch’s 56 rated private colleges in fiscal 2025. That figure, which includes endowment income, has improved from -2% the prior year and -1.7% in fiscal 2023. But margins varied widely by the profile of colleges, with larger and higher-rated colleges performing much better. The highest-rated institutions had a median margin of 10.8%, for instance.

4.4%

Median growth in tuition and fee revenue across Fitch’s portfolio of private colleges in fiscal 2025, a 1 percentage point increase from last year.

40.7%

The median tuition discount rate during the 2025 fiscal year, a new high and a continuation of the “unsustainable trajectory from pre-pandemic discount levels of 34.5% in fiscal 2019,” Fitch analysts said.

15.6 years

Median age of college facilities across Fitch’s portfolio, which analysts said signals “ongoing deferred maintenance and infrastructure needs.”

Quote: “Pent up capital and strategic needs may prompt an increase in new debt issuance for those that lack alternate means and could pressure institutions with less financial flexibility to absorb additional debt or other financial shocks.” — Nancy Moore, director at Fitch Ratings.

What we’re watching: Fitch’s report shows not only the continued strain on the higher ed sector but also its division, with larger and better-resourced colleges outperforming their smaller peers on most metrics. Along with enrollment and tuition pricing pressures, smaller colleges may need to diversify their revenue base and control cost growth to remain sustainable.