The latest Fitch Ratings outlook for 2026 casts a long shadow over higher education. As Higher Ed Dive reports, the sector is facing a deteriorating financial trajectory driven by declining domestic and international enrollment pools, rising costs, and ongoing uncertainty around public funding. The warning is stark: many institutions, but particularly small, highly tuition-dependent ones, will encounter significant financial strain in the years ahead. Some will merge. Some will close.

It’s a sobering moment for anyone who cares about higher education’s mission and purpose. 

But the full story is more complicated—and more hopeful.

Today, higher ed is experiencing two very different realities at once. On one side, institutions are confronting enrollment declines, budget deficits, and the pressure to radically restructure. On the other, a growing number of colleges are enrolling more students than ever, investing in new programs that shift their public perception, improving student experience, and adapting quickly to meet new needs.

If there’s one thing these diverging paths make clear, it’s this:

The future belongs to the institutions willing to innovate.

Reality #1: Institutions Under Strain: Closures, Mergers, and Shrinking Enrollment

The financial pressures facing colleges are not abstract. A decade-long trend of enrollment erosion, combined with demographic shifts and skepticism about the value of a degree, has already prompted a wave of closures and consolidations. Analysts expect these numbers to rise as the demographic cliff approaches and competition intensifies.

For many institutions, especially small regional colleges reliant on tuition revenue, doing “more of the same” is no longer an option. The traditional model is under strain, and students’ expectations around cost clarity, flexibility, and support have changed dramatically.

This is the part of the story that weighs heavily: towns lose anchor institutions, students lose continuity, and higher ed loses pieces of its diverse ecosystem.

And yet, another reality exists simultaneously.

Reality #2: Institutions Charting a New Path (and Growing Because of it)

Even in a challenging landscape, many institutions are rewriting the narrative. They’re not just surviving. They’re growing. At financial aid conferences in both New Jersey and Pennsylvania, we heard from several regional public and flagship universities for whom the current doom and gloom about higher education didn’t seem to apply. Their teams have been encouraged to innovate, adding entirely new schools like veterinary medicine, developing a robust online program that draws from around the globe, and rethink the student financial experience to convey the value they offer.

Austin Peay State University: Record Enrollment Amid National Declines

Austin Peay State University stands out as a powerful example. While many institutions face enrollment contractions, APSU hit record enrollment, driven by a renewed focus on transparency, cost clarity, and a proactive approach to supporting students through financial uncertainty.

In our recent case study, Transparent Costs, Confident Students: Austin Peay’s Formula for Growth Amid Uncertainty, APSU shows that growth is possible (even in a tough market) when institutions build trust with students and simplify the financial experience.

Oklahoma Wesleyan University: A Student-First Overhaul of Pre-Collections

Similarly, Oklahoma Wesleyan University (OKWU) embraced clarity, fairness, and flexibility as defining pillars of how they engage students in financial hardship. Their transformation of pre-collections, or, the time in the billing cycle after accounts are past-due and before they’re sent to traditional collections, not only improved recovery but strengthened student confidence, demonstrating the link between student-centered practices and institutional health.

As highlighted here, OKWU’s approach proves that institutions don’t have to choose between financial outcomes and student well-being. They can achieve both.

Across the country, the institutions outperforming their peers are the ones rethinking how they serve students, how they communicate about costs, and how they reduce friction around the financial experience.

These success stories aren’t outliers. They are signals.

The Divide is Growing. Innovation is the Difference.

When you zoom out, higher ed’s “two realities” reveal a simple truth:

• Institutions sticking to legacy processes and tools are struggling.
• Institutions modernizing the student experience are growing.
  
  

Innovation—especially around financial transparency, pricing clarity, flexible payment pathways, and student support—is no longer a differentiator. It’s the dividing line.

The demographic cliff doesn’t hit every institution equally. The value narrative doesn’t land evenly. The pressures are uneven, but so are the results.

Colleges that embrace modernization are creating environments where students find degree pathways that interest them, feel informed, supported, and confident. And confidence translates to enrollment, persistence, and institutional health.

Meanwhile, institutions that postpone or avoid change find themselves more vulnerable to the very pressures highlighted in the Fitch outlook.

Where Higher Ed Goes From Here

Here at Meadow, we’ve sometimes been sheepish about being a “newer” kid on the block. Higher education leaders are often skeptical of non-legacy solutions. They come in promising the world and often underdeliver, and the stakes are high for poor choices in partners. But today we wear our newness with pride. We’re proud to facilitate innovation across the student financial experience (not to mention better enrollment outcomes) for over 300 institutional partners. Our newness is our competitive advantage: we were built for today’s students and the challenges facing higher education in 2026 and beyond. 

The next few years will test the sector. Some institutions will transform; others may consolidate or close. But the narrative of inevitable decline misses what’s actually happening:

Higher ed is entering an era of reinvention, not collapse.

Students are demanding clarity, flexibility, and fairness. Institutions that listen and respond will be the ones shaping the future. And as APSU, OKWU, and others show, the payoff is real.

The path forward is clear:

Those who innovate will thrive. Those who don’t will struggle to survive.

Higher ed is rewriting itself in real time. The most successful institutions will be the ones bold enough to lead the change.

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