S&P joins Moody’s Ratings in its gloomy forecast of higher education’s financial prospects in the new year.

Moody’s issued a negative outlook for the overall sector in November, citing similar woes: enrollment disruption from demographic changes, Trump administration policies, and continued — albeit slowed — operating cost increases.

Last year around this time, S&P analysts split their outlook for the sector in 2025, leaning negative for “highly regional, less-selective institutions that lack financial flexibility” but positive for larger colleges with ready demand and ample resources.

However, the Trump administration has since waged a painful campaign against many of those large, previously well-positioned institutions.

The federal government has frequently frozen the research funding of the high-profile colleges it is investigating. It has also broadly curtailed college research funding, long a source of revenue and jobs at universities and innovation and knowledge for the country.

Next year could bring more cuts to research funding as federal agencies push for limiting reimbursement for overhead research costs. However, federal courts have so far blocked those moves.

“We believe that a continued contraction in funding could not only threaten the financial health of institutions across the country, but could also jeopardize graduate and postdoctoral programs, and overall research capabilities,” S&P analysts wrote. They added that many of the large institutions navigating research cuts are financially strong overall and have “robust” liquidity, helping them to weather the disruption.

S&P expects additional challenges for the more regional and less selective colleges. The population of high school graduates has been forecast to peak in 2025, leaving fewer traditional-age students for colleges to compete over.

“Schools with a highly regional draw will likely face continued diminishing enrollment, unless they can attract students through expanded programmatic diversity — from master’s and doctorate programs to certificate programs,” analysts wrote. They noted, however, that it can take years for colleges to see the benefits of expanding academic offerings.

Read the full article about nonprofit colleges by Ben Unglesbee at Higher Ed Dive.