How Neoliberal Policies Are Collapsing U.S. Universities, Explained

American higher education institutions across the United States are facing severe financial destabilization, marked by sweeping budget deficits, staff layoffs, and university closures. Heading into 2026, colleges and universities are grappling with the fallout of corporate-style governance, declining public trust, and rising tuition costs. Key institutions like Portland State University in Oregon reflect the broader national crisis, recently projecting a structural deficit of $35 million amid ongoing academic restructuring.

The financial downturn follows a tumultuous period for higher education employment. U.S. colleges recorded roughly 9,000 job cuts and voluntary buyouts in 2025 alone. The crisis has forced several higher education institutions into mergers or permanent shutdowns. In Oregon, state-level academic restructuring has already resulted in 36 faculty layoffs and the elimination of award-winning interdisciplinary initiatives such as the University Studies program. Unlike major private corporations, post-secondary institutions lack government bailout mechanisms to absorb multi-million-dollar structural deficits, leaving faculty, staff, and enrolled students vulnerable to sudden operational collapses.

Industry analysts and academic organizations attribute the systemic failure to decades of fiduciary mismanagement and shifting institutional priorities. Reports from Forbes and the American Association of University Professors indicate that administrative bloat—specifically the hiring of costly external enrollment management consultants and non-instructional personnel—has significantly inflated operating expenses. Concurrently, public and private universities have poured capital into real estate projects, fancy residence halls, and athletic programs, while underinvesting in core academic departments and faculty compensation.

This fiscal realignment has fundamentally altered the academic labor force. To offset rising operational costs, university boards of trustees and administration have increasingly relied on underpaid adjunct instructors, creating a system that scholar Adrianna Kezar describes as The Gig Academy. Meanwhile, tenured and full-time faculty salaries have failed to recover from reductions implemented during the COVID-19 pandemic. Overworked instructional staff are simultaneously tasked with managing larger class sizes and supporting students facing mental health issues, food insecurity, and learning accommodations.

Despite annual tuition costs exceeding $60,000 and reaching upwards of $90,000 at some universities, institutions are systematically reducing academic disciplines in the arts, sciences, and humanities to prioritize revenue-generating job training programs. However, data indicates that cutting liberal arts programs may be counterproductive to long-term student success. Research cited by the Mellon Foundation and the American Academy of Arts and Sciences reveals that 96.3 percent of terminal humanities bachelor degree holders between the ages of 23 and 32 are fully employed, a rate comparable to graduates in social and life sciences.

As crushing student loan debt continues to burden American families, higher education experts warn that the primary threat facing universities is the abandonment of their fundamental public mission to cultivate critical thinking, civic responsibility, and long-term intellectual growth for the broader public good.

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