America’s colleges and universities are sitting on millions of empty seats, and the gap between what they can teach and what they’re actually teaching is projected to widen over the next decade, according to a new report from EY-Parthenon commissioned by Lumina Foundation.
The analysis, released in June 2026, updates a 2020 study on excess capacity in higher education, this time tracking data through fiscal year 2025 and projecting trends out to 2035. Its central finding: the sector operated at roughly 78% of its estimated instructional capacity in FY25, meaning colleges and universities had built enough teaching infrastructure — faculty, programs, and support staff — to serve about 4.2 million more full-time-equivalent students than they actually enrolled.
The mismatch stems from a basic supply-and-demand problem. While overall student enrollment has either declined or stayed flat in recent years, many institutions kept hiring instructors and expanding academic programs anyway, largely to stay competitive in an increasingly crowded market for students. Between fiscal years 2015 and 2025, total enrollment fell by roughly 3%, yet the system’s maximum teaching capacity grew by more than 2% over the same stretch — a divergence that pushed utilization down from 82% to 78%.
The report warns that without a change in course, the situation will likely deteriorate further. Researchers project utilization could slip to around 74% by 2035, adding close to half a million more surplus seats to the system, driven largely by a shrinking pool of traditional college-age students as the country’s declining birth rates work their way into college enrollment numbers.
Not every corner of higher education is affected equally. The report finds meaningful differences by institution type, sector, and geography. Public two-year colleges have seen the sharpest enrollment losses, while private, nonprofit four-year schools tend to run at lower utilization than their public counterparts, in part because of more resource-intensive staffing models. Highly selective schools also show comparatively low utilization, a pattern researchers link to deliberately low student-to-faculty ratios that schools maintain to preserve their reputations rather than to financial distress. No state topped 90% utilization in FY25, and the report notes that some states are positioned to see modest improvement in the coming years while others face continued decline.
Importantly, the report stops short of framing underused capacity as inherently bad. Some institutions may keep smaller class sizes or additional academic resources on purpose, treating them as part of their educational mission rather than as waste. But the report cautions that when a significant capacity gap persists over time, it can compound financial strain — particularly for schools already contending with enrollment drops, rising operating costs, and a job market whose skill demands keep shifting.
Rather than prescribing a single solution, the report lays out a menu of options for college and state leaders to weigh based on their own circumstances. These include recruiting more adult learners and other nontraditional students, improving retention so more enrolled students stay enrolled, consolidating or retooling programs with weak demand, pooling administrative or academic services with other institutions, and, in some cases, considering mergers or closures where the numbers no longer add up.
The report’s broader message is less about any one fix and more about mindset: as the traditional-age college population shrinks and the demand for education and training continues to evolve, institutions and policymakers alike need to plan deliberately for a smaller, differently shaped higher education system rather than assume enrollment will eventually rebound to fill the space they’ve built.
