Alarming number of small US colleges are struggling and misusing donations to stay open

Hundreds of small US colleges are struggling to pay their bills — and some are misusing scholarship funds and endowments to stay afloat.Over 440 schools across the country could close in the next 10 years as they struggle to keep up with operating costs, with about 200 last year tapping into endowment funds to keep the lights on, according to higher education consultants Huron Consulting and Perspective Data Science.Those numbers have been rising at an alarming rate.Schools pulling from their endowments at rates higher than 7% — an indicator of financial trouble — almost doubled over the last decade, climbing to 19.3% in 2025 from 9.7% in 2016, the Wall Street Journal reported.And the number of schools drawing from endowments at 15% tripled during the same period, hitting 5% as of 2025, according to an assessment of 1,000 schools from Perspective Data Science.“A lot of schools are doing whatever they can to keep the lights on,” Perspective Data Science founder Matthew Hendriks told the Journal.Those desperate measures can translate to millions of dollars in scholarship cash being used for purposes other than what the donors intended — and which schools are often legally required to put such donations toward.Ohio’s now-closed Notre Dame College was accused in 2025 by the state’s attorney general of using more than $2 million in restricted funds for purposes other than what they were intended for, according to the Journal, a charge the school has denied.One instance at the school allegedly included a $30,000 scholarship endowment given by the widow of a late 20-year Notre Dame professor, which stipulated the cash could only be used for scholarships.

When the school closed in 2024, widow Natalie Strauss asked for the money back so she could reestablish the fund at another school — but she was allegedly told the cash had been spent.“She told me they used it to pay the bills,” Strouse told the Journal.“I consider it theft.”Endowments typically...