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The higher-education sector has faced no shortage of obstacles this year. Shifting legislation, cuts to federal grants and long-percolating demographic headwinds have all weighed on the future of education. The Business Journals' national news team has put together a series of stories looking at the challenges facing the industry and what affect they might have on other parts of the economy.
One major challenge facing higher-education institutions is the potential risk for understaffing in the U.S. Department of Education and how that could affect the agency’s ability to administer federal financial-aid programs, said Larry Ladd, a specialist with the Association of Governing Boards of Universities and Colleges and former director of budget and financial planning at Harvard University. In March, President Donald Trump's administration announced the department would lay off more than 1,300 employees, Alan Kline of the Washington Business Journal reported.
Another challenge comes from cuts to federal research funding. The National Institutes of Health reported about $16.14 billion in funding through July 29 this year, down from $22.87 billion during the same period in 2024, according to public data. That’s a 29.4% decrease, on top of $2.12 billion in existing grant funding that has already been terminated. Less NIH funding ultimately will mean cuts to research and higher education. It's also likely to have ripple effects on the startup and innovation ecosystems in metros around the nation.
"Anyone who says they have an alternative plan probably is overstating," said John King Jr., chancellor of the State University of New York system. "If the NIH dollars go away, it’s a disaster — a disaster for the country, a disaster for the health and well-being of Americans, and a disaster for higher education.”
On top of the more-acute issues unique to 2025, the higher-education sector continues to struggle with enrollment stagnation because of the changing demographics of college-age Americans and a transactional perspective from would-be students. This year is expected to be the last year for some time in which the size of the high-school graduating class will be larger that its predecessor. Starting in 2026, the number of fresh graduates is expected to trend downward.
Universities for decades have been key drivers of local economic development and breeding grounds for new businesses, as well as steady sources of jobs for their metro areas, reports Andy Medici of The Business Journals. That role is now in jeopardy at a time when communities are still adjusting to the post-pandemic world of more remote work and less foot traffic — and the economic shocks that have come alongside those trends.
"The question isn’t just what happens when universities pull back, it’s who pays the price when they do," said Patrice Williams-Lindo, a workforce futurist and CEO of Career Nomad, in an email to Medici. "And the answer is clear: local economies, vulnerable workers and future talent pipelines."
Quantifying how much a university contributes to a local economy can be challenging.
Beyond direct spending on staff, goods and services, a 2019 study published in the Economics of Education Review found a 10% increase in a region’s number of universities per capita was associated with a 0.4% higher future GDP. A Census Bureau paper from 2012 found that for every patent earned by a university, about 15 jobs are created over 20 years.
Outright campus sales have become more common across the country amid these headwinds as some schools have decided to consolidate or close underperforming satellite campuses, reports Ashley Fahey, editor of The National Observer: Real Estate. Bard College, for instance, is selling a 275-acre campus in Great Barrington, Massachusetts. It will relocate the operations at the campus — an early-college program run by the school — to Bard's primary location in New York.
"Given some of the headwinds in higher education, this one struggles to meet its enrollment targets — it’s looking for students before they’re in college," said Taun Toay, senior vice president and chief financial officer at Bard College, about the Simon's Rock campus, where students can begin college as early as after 10th grade.
These deals can create unique real estate opportunities for cities and towns across the United States. The campuses often occupy large, contiguous positions in areas with a high demand for housing or mixed-use development but little undeveloped property remaining.
That isn't always the case, of course. If the land is zoned exclusively for institutional or educational use, or if it's located in a low-density area, it can be tougher to sell a whole campus, and the deal may not yield the returns university leadership might have hoped for. In many cases, a real estate deal won't be enough to dig an institution out of its financial troubles.
"For many of the smaller institutions that have their back up against the wall, it’s not enough. More severe change is necessary," said David Carlos, head of the nonprofit, education and government practice at Jones Lang LaSalle Inc.'s Tri-State office, which covers the New York, New Jersey and Connecticut region.
Figma's explosive public market debut may encourage the next wave of tech companies that have been ready and waiting to hold their own initial public offerings, reports Sara Bloomberg of the San Francisco Business Times.
Figma shares quickly skyrocketed to more than triple its IPO price after it went public last week before turning downward this week.
"A warm reception for some certainly encourages others to move," said Lise Buyer, the founder of consulting firm Class V Group.
After a few years of unfavorable market conditions, there's been a flurry of high-profile IPOs this year. In the Bay Area, Figma is the latest after Chime, Omada Health and Hinge Health. Buyer, who advises companies on their IPO plans, said she expects to see some activity for public debuts in the second half of the year, but the market will likely pick up more by mid-2026, she said.
"Momentum has been building, and what was a one-off has become a trend," Buyer said. "Investors are enthusiastic for new issues and have been starved for them. ... Everyone was waiting for someone else to jump into the ocean first to make sure there were no sharks."
Economic uncertainty — particularly as a result of on-again-off-again tariffs from the federal government — has stymied IPO activity that some expected to increase in 2025. New listings have declined every year since 2021.
Unless there's a significant rush to go public in the second half of the year, 2025 could be see the lowest activity since 2017, when there were 316 new listings for the full year.
FULL STORY: Figma's successful IPO creates 'warm reception' for next wave
FURTHER READING: IPO market remains 'sluggish' despite recent listings
When ride-sharing service Uber launched in 2010, it quickly took the United States by storm with its easy-to-use mobile app — and its low prices.
Those low prices have since disappeared as the app grew its user base and the company began to work toward profitability. It's a lesson that may be valuable in the near future: The artificial-intelligence sector looks to be approaching a similar turn, reports Andy Medici of The Playbook.
The explosive growth of generative AI has resulted in widespread access to free or low-cost AI services for hundreds of millions of people. The companies that provide those services do so at a loss right now, but many of them are looking to raise prices.
The New York Times, citing internal OpenAI documents, reported OpenAI was planning to gradually raise its subscription rate from $20 per month to $44 per month. AI firm Anthropic introduced new rate limits to curb use of its AI coding tool, Claude Code, among its various paid plans — a move that came after it raised prices in 2024. AI firm Perplexity also recently announced a new $200 per month "Max" tier.
"AI companies are going through a 'customer acquisition at all costs' period, similar to early Uber, preferring to own the market and the user need rather than making money now," said Aaron Whittaker, vice president of demand generation and marketing at digital-marketing agency Thrive. "The free and low-cost we see today is not viable in the long run, but has been borne by unsustainable [venture capital] subsidies."
The inflection point on pricing likely will come in the next 18 to 24 months, as investor patience for growth over profit wanes and the actual cost of computing stays somewhat unchanged, despite gains in efficiency, Whittaker said.
THE BOTTOM LINE: Small-business owners should be preparing for even higher prices to use AI tools and programs — a dynamic that may become difficult as AI becomes more integrated in their operations.
FULL STORY: AI tools are nearing their 'Uber' moment. It may mean sticker shock for businesses.
