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The Economic and Social Impact of Small Colleges in Rural Communities

By Dean Hoke, October 13, 2025 – In the small towns of America, where factories have closed and downtowns often stand half-empty, a small college can be the heartbeat that keeps a community alive. These institutions—sometimes enrolling only a few hundred students—serve as economic anchors, cultural centers, and symbols of hope for regions that might otherwise face decline.

From the farmlands of Indiana to the mountain towns of Appalachia, small colleges generate economic energy far beyond their campus gates. They attract students, faculty, and visitors, stimulate local business, and provide the trained workforce that rural economies desperately need. They also embody something deeper: a sense of identity and connection that sustains civic life.

Economic Impact: Anchors in Fragile Economies

Small colleges are powerful, if often overlooked, economic engines. Their presence is felt in every paycheck, every restaurant filled with students and parents, and every local business that relies on their purchasing power.

Across the United States, nearly half of all public four-year colleges, over half of all public two-year colleges, and a third of private four-year colleges make up the 1,100 rural-serving institutions as identified by the Alliance for Research on Regional Colleges (ARRC). These colleges educate 1.6 million students, accounting for more than a quarter of total U.S. enrollments. Yet their role extends far beyond classrooms and degrees.

Rural-serving institutions are frequently among the largest employers in their counties, especially where other industries have faded. In areas where 35% or more of working-age adults are unemployed, 83% of local colleges are rural-serving, making them pillars of economic stability. Unlike large universities in metropolitan areas, their spending is highly localized—on utilities, food service, maintenance, and partnerships with small vendors.

Economic models underscore their importance. The Brookings Institution found that high-performing four-year colleges contribute roughly $265,000 more per student to local economies than lower-performing institutions, while two-year colleges add about $184,000. In many rural towns, every institutional dollar recirculates multiple times, magnifying its effect.

Beyond direct payroll and procurement, small colleges attract outside dollars. Students and visitors rent housing, dine locally, and shop downtown. Athletic events, alumni weekends, and summer programs bring tourists who fill hotels and restaurants. The IMPLAN consulting group estimated that when a college closes, the average regional loss equals 265 jobs, $14 million in labor income, and $32 million in total economic output—a devastating hit in thin rural economies.

Human Capital and Workforce Development

If small colleges are the economic engines of rural communities, they are also the primary producers of human capital. They educate the teachers, nurses, business owners, and civic leaders who sustain local life.

The Federal Reserve Bank of Richmond describes community colleges as “anchor institutions” that shape regional labor markets. Many partner with local employers to design training programs that meet specific workforce needs—often at minimal cost to businesses. In one case study, a rural college collaborated with an advanced manufacturing firm to tailor instruction for machine technicians, ensuring a steady local labor supply and convincing the company to expand rather than relocate.

Rural-serving colleges are also critical in addressing educational disparities. Only 22% of rural adults hold a bachelor’s degree, compared with 37% of non-rural Americans. This gap translates directly into income inequality: according to the U.S. Department of Agriculture’s Economic Research Service, nonmetro workers with a bachelor’s degree earned a median of $52,837 in 2023, compared with substantially higher earnings for their urban counterparts. In states such as Indiana, Ohio, and Pennsylvania, rural degree attainment lags 10 to 15 percentage points behind state averages.

Beyond Economics: RSIs as Equity Infrastructure

Rural-serving institutions are more than economic engines—they are critical equity infrastructure, often providing the only realistic pathway to higher education for students the system has historically marginalized.

RSIs enroll far higher proportions of high-need students than their urban counterparts. Nearly 50% of undergraduates at RSIs receive Pell Grants, compared to 34% nationally. These institutions also serve disproportionate numbers of first-generation students, working adults, and students from underrepresented communities who lack access to flagship universities.

For many rural students, the local college isn’t a choice—it’s the only option. Geographic isolation, family obligations, and financial constraints make residential college attendance impossible. Research shows that every ten miles from the nearest college reduces enrollment probability by several percentage points. For students without transportation, without broadband for online learning, or without family support to relocate, the local institution is existential.

When rural colleges close, equity suffers most. Displaced students, if they re-enroll at all, face higher debt burdens and lower completion rates. Wealthier students can transfer to distant institutions; low-income students stop out. Communities of color, already underserved, lose ground.

Policymakers often evaluate colleges through narrow metrics: completion rates and graduate earnings. But this ignores mission differentiation. RSIs serve students that flagship universities would never admit, in places that for-profit colleges would never enter, at prices that private colleges could never match. Investing in rural-serving institutions isn’t charity—it’s infrastructure investment in equity, ensuring every region has pathways to economic mobility. If America is serious about educational equity, it must recognize RSIs as essential public infrastructure, not discretionary spending.

Despite these barriers, rural institutions remain lifelines for upward mobility. They offer affordable tuition, flexible programs for working adults, and pathways for first-generation students who might otherwise forgo higher education.

However, the pressures are real. Rural students face tighter finances, higher borrowing costs, and fewer grant opportunities. Nearly half of rural undergraduates receive Pell Grants, but average aid remains lower than that at urban institutions. Many graduates leave rural areas to find higher-paying jobs, a “brain drain” that weakens local economies. Yet for those who stay—or return later—their impact is outsized, driving new business formation, civic leadership, and generational stability.

Example: Goshen College and Elkhart County, Indiana — A Model of Mutual Benefit

The following example illustrates the positive interdependence of a small college and its surrounding community—how shared growth, service, and opportunity can strengthen both the institution and the region it calls home.

Few examples better demonstrate this relationship than Goshen College in northern Indiana. Founded in 1894 by the Mennonite Church, Goshen sits in Elkhart County, a region best known for its manufacturing and recreational vehicle industries. While the area has long been an economic hub, its continued success depends heavily on education and workforce development—both areas where Goshen College has quietly excelled for more than a century.

Goshen employs more than 300 full-time and part-time faculty and staff, making it one of the city’s largest private employers. Its local purchasing—from food services to maintenance and printing—injects millions of dollars annually into the county’s economy. The student body, drawn from across the Midwest and around the world, supports rental housing, restaurants, and small businesses throughout the region.

According to the 2024 Independent Colleges of Indiana Economic Impact Study, Goshen College contributes roughly $33 million each year to the regional economy through employment, operations, and visitor spending. Beyond the numbers, the college enriches community life. The Goshen College Music Center and Merry Lea Environmental Learning Center are regional treasures, hosting performances, lectures, and research programs that attract thousands of visitors annually. During the COVID-19 pandemic, the college partnered with local health officials to serve as a testing and vaccination site—further demonstrating its civic commitment. Its nursing, environmental studies, and teacher preparation programs continue to meet critical workforce needs across Elkhart County and beyond.

Goshen College stands as a model of how a small private college and its community can thrive together. Its example underscores a broader truth: when rural colleges remain strong, the benefits extend far beyond campus—bolstering jobs, sustaining income, and enriching the civic and cultural life that define their regions.

Social and Cultural Role: The Heart of Civic Life

Beyond numbers, the social and cultural influence of rural colleges may be their most irreplaceable contribution. In many counties, the college auditorium doubles as the performing arts center, the gym as the public gathering space, and the library as a community hub.

Rural colleges host art shows, festivals, lectures, and athletics that bring people together across generations. They sponsor service projects, tutoring programs, and food drives that connect students with their neighbors. For residents who might otherwise feel isolated or overlooked, the local college provides a sense of belonging and civic pride.

Research from the National Endowment for the Arts underscores that local arts participation strengthens community bonds and well-being. Rural colleges amplify that effect by providing both venues and expertise. Their faculty often lead community theater, music ensembles, or public workshops—bringing culture to places that might otherwise lack access.

The COVID-19 pandemic vividly demonstrated this social bond. While large universities shifted to remote learning with relative ease, small rural colleges had to improvise with limited broadband access and fewer resources. Yet many became essential service providers—hosting testing centers, distributing food, and maintaining human contact in otherwise isolated communities.

In these moments, small colleges revealed what they have always been: not just educators, but neighbors and caretakers.

Challenges: Fragility and the Risk of Decline

Despite their immense value, small rural colleges operate under fragile conditions. Their scale limits efficiency, their funding sources are volatile, and demographic shifts threaten their enrollment base.

Enrollment Declines and Demographic Pressures.

A steep decline in traditional-age students is projected to start by 2026, with the number of new high school graduates expected to fall by about 13 percent by 2041, according to The Chronicle of Higher Education, March 3, 2025, article “What is the Demographic Cliff”. For rural colleges already competing for a shrinking pool of students, this decline threatens their enrollment base and financial viability. Many have already experienced double-digit enrollment drops since the Great Recession. Rural public bachelor’s/master’s institutions enroll 5% fewer students today than in 2005, while community colleges struggle to recover from pandemic-era losses.

Financial Constraints.
Small colleges rely heavily on tuition revenue and relatively modest endowments. According to the Urban Institute, the median private nonprofit four-year college holds about $33,000 in endowment assets per student, compared with hundreds of thousands of dollars per student at elite universities such as Amherst or Princeton. For many rural private colleges, endowment resources are often well below this national median. Their financial models depend heavily on tuition and auxiliary income, leaving them vulnerable when enrollment softens. Fundraising capacity is also limited: alumni bases are smaller and often less affluent than those of major research universities, making sustained growth in endowment and annual giving more difficult to achieve.

Operational Challenges.
Compliance, accreditation, and technology costs weigh disproportionately on small staffs. Many rural colleges lack the personnel to pursue major grants or expand programs quickly. Geographic isolation compounds difficulties in recruiting faculty and attracting external partnerships.

Brain Drain and Opportunity Gaps.
Even when colleges succeed in educating local students, retaining them can be difficult. Many leave for urban areas with higher wages and broader opportunities. The irony is painful: the better a rural college fulfills its mission of empowerment, the more likely it may lose its graduates.

Closures and Community Fallout.
When a small college shuts its doors, the ripple effects are severe. Studies estimate average regional losses of over $20 million in GDP and hundreds of jobs per closure. Local businesses—cafés, landlords, bookstores—suffer immediately. Housing markets soften, municipal tax revenues drop, and cultural life diminishes. It can take a decade or more for a community to recover, if it ever does.

Reversing the Talent Flow: Retention Strategies That Work

The brain drain challenge is not insurmountable. Several states and institutions have pioneered retention strategies that show measurable results.

Loan forgiveness programs specifically targeting rural retention have gained traction. Kansas’s Rural Opportunity Zones offer up to $15,000 in student loan repayment for graduates who relocate to designated counties. Maine provides annual tax credits up to $2,500 for graduates who live and work in-state. Early data suggests these programs can shift settlement patterns, particularly in high-demand fields like nursing and teaching.

The most effective models involve tri-party partnerships: colleges provide education and career counseling, employers offer competitive wages and loan assistance, and municipalities contribute housing support or tax relief. In one Ohio example, a regional hospital, community college, and county government created a “stay local” nursing pathway that reduced turnover by 40% over five years.

Place-based scholarships are also emerging as retention tools. “Hometown Scholarships” provide enhanced aid for students from surrounding counties who commit to working regionally after graduation. When paired with community-engaged learning and local internships throughout the curriculum, these programs cultivate regional identity—shifting the narrative from “I have to leave to succeed” to “I can build a meaningful career here.”

Federal policy could amplify these efforts. A Rural Talent Corps modeled on the National Health Service Corps could leverage student loan forgiveness to address workforce shortages while stabilizing rural economies. The brain drain will never disappear entirely, but intentional investment can shift the calculus from inevitable loss to manageable flow.

Policy Pathways and Strategies for Resilience

Sustaining small colleges—and the communities they support—requires creativity, collaboration, and policy attention.

1. Deepen Local Partnerships.
Rural colleges thrive when they align closely with regional needs. Employer partnerships, dual-enrollment programs, and apprenticeships can connect education directly to local labor markets. In Indiana and Ohio, several colleges now co-design health care and manufacturing programs with regional employers, ensuring steady pipelines of skilled workers.

2. Form Regional Alliances.
Small institutions can collaborate rather than compete. Shared academic programs, cross-registration, and joint purchasing agreements can reduce costs and expand offerings. Examples such as the New England Small College Innovation Consortium show how collective action can extend capacity and visibility.

3. Diversify Revenue and Mission.
Rural colleges can strengthen financial resilience by expanding adult education, microcredentials, and workforce training. Many are converting underused buildings into community hubs, co-working spaces, or conference centers. Others are developing online and hybrid programs to reach place-bound learners in neighboring counties.

4. Increase State and Federal Support.
Federal recognition of Rural-Serving Institutions within the Higher Education Act could unlock targeted funding similar to programs for Minority-Serving Institutions. States should adapt funding formulas to reflect mission-based outcomes—rewarding colleges that serve low-income, first-generation, and local students rather than penalizing them for small scale.

5. Encourage Philanthropic Investment.
Foundations and donors have historically overlooked rural institutions in favor of urban flagships. Increasing awareness of their impact could mobilize new giving streams, particularly from community foundations and regional philanthropists.

6. Invest in Infrastructure.
Broadband access, housing, and transportation are essential to sustaining rural higher education. Expanding digital infrastructure allows colleges to deliver online learning, attract remote faculty, and connect to global markets.

Looking Ahead: The Role of Small Colleges in Rural Renewal

As rural America seeks to reinvent itself in the 21st century, small colleges are uniquely positioned to lead that renewal. They combine local trust with national expertise, and they possess the physical, intellectual, and moral infrastructure to drive change from within.

Their future will depend on adaptability. Colleges that align programs with regional industries, embrace digital learning, and form strategic alliances can thrive despite demographic headwinds. Institutions that cling to older models may struggle.

Yet the measure of success should not be enrollment size alone. A rural college’s value lies in its multiplier effect—on jobs, community life, and civic identity. For many counties, it is the last remaining institution still rooted in the public good.

Conclusion: Investing in Irreplaceable Infrastructure

Small colleges in rural America are far more than schools. They are community builders, employers, cultural anchors, and symbols of local resilience. Their closure can hollow out a county; their success can revive one.

The rural-serving institutions identified by ARRC represent a quarter of U.S. enrollments but touch nearly half the nation’s geography. They serve regions facing population loss, persistent poverty, and limited opportunity—yet they continue to educate, employ, and inspire.

The choice facing policymakers, philanthropists, and citizens is simple: either we invest in these engines of opportunity, or we risk watching the lights go out in hundreds of rural towns.

The question is no longer whether we can afford to support small rural colleges but whether America can afford not to.

Sources and References

  • Alliance for Research on Regional Colleges (ARRC). Identifying Rural-Serving Institutions in the United States (2022).
  • Brookings Institution. The Value of Higher Education to Local Economies (2021).
  • Federal Reserve Bank of Richmond. Community Colleges as Anchor Institutions: A Regional Development Perspective (2020).
  • National Student Clearinghouse Research Center. High School Benchmarks 2022: National College Progression Rates.
  • National Endowment for the Arts. Rural Arts, Design, and Innovation in America (2017).
  • Lumina Foundation. Stronger Nation: Learning Beyond High School Builds American Talent (2024).
  • National Skills Coalition. Building a Skilled Workforce for Rural America (2021).
  • IMPLAN Group, LLC. Measuring the Economic Impact of Higher Education Institutions (2023).
  • U.S. Census Bureau. Educational Attainment in the United States: 2023 (American Community Survey Tables).
  • Bureau of Labor Statistics. Employment and Earnings by Educational Attainment, 2023.
  • Goshen College. Economic Impact Report 2022 and institutional data from the Office of Institutional Research.

Dean Hoke is Managing Partner of Edu Alliance Group, a higher education consultancy, and a Senior Fellow for the Sagamore Institute located in Indianapolis, Indiana. He formerly served as President/CEO of the American Association of University Administrators (AAUA). Dean is a champion for small colleges in the US. and is committed to celebrating their successes, highlighting their distinctions and reinforcing how important they are to the higher education ecosystem in the US. Dean is the creator and co-host for the podcast series Small College America.

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Higher Education Leadership in Times of Crisis Part II

By Dr. Barry Ryan, September 15, 2025 – In my August 11th article titled ‘Higher Education Leadership in Times of Crisis,” we established that higher education leadership today cannot be solitary work and that effective crisis response requires both internal and external counsel. Now that you’ve assembled (at least thought through) your cast of trusted advisors and recognized the unique leadership demands of your situation, the next critical step is understanding what you’re actually facing—and how to navigate it successfully. Once you recognize that your organization may be entering such a time, there are three key initial questions to ask:

  1. How long can a crisis be expected to last?
  2. What are the effects of crisis on my institution, on my team, on my loved ones, and on me?
  3. What are some healthy and effective ways I can lead during crisis?

First, how long should I expect a “typical” crisis to last?

At first blush, it might seem a little silly to ask how long a crisis lasts. After all, isn’t that inherently unpredictable?

The answer is “yes” and “no.” It may seem a little flippant to say, but the reality is that the length of a crisis depends to a certain degree on how you and those in leadership alongside you respond to it. Your approach and actions may make it longer or shorter than it would have been. Here’s what I mean.

Ignoring a crisis and hoping that it blows over is actually a potential strategy—although not one that I would recommend in most circumstances. But there are some built-in roadblocks in a university’s life cycle, which is divided largely into annual, semester, or quarter segments. These can act, on their own, as speed bumps or detours that might diminish or change the course of a crisis.  

For example, a crisis that is being instigated or aggravated by certain individuals might be relieved to some degree on its own by their departure through retirement, transfer, and so on.  Or a financial crisis might be alleviated by the structural limits on certain types of debt that will be paid off, or the inception of certain grants or gifts that are within sight. But these are, unfortunately, uncommon scenarios, and the timing may be unpredictable.

On a global scale, one might think of Winston Churchill trying to imagine how long World War II might last. As futile as such a task might have been, he did, indeed, play out various scenarios and their likely duration. Although it makes for a great quote and probably captures an important aspect of Churchill’s thinking, he likely did not say, “When you’re going through hell, keep going.” But that’s a good reminder for anyone in crisis.

To grossly generalize, I have found that most institutional crises last between six months and two years. Why is that? The more acute ones require quicker action, and the result is either a solution that addresses the issues promptly and efficiently, in, say, six months, and you can move on to other things. Or, failing to find a speedy solution may end with you moving on. (And I don’t mean this lightly, but the reality is that moving on is not the end of the world.)

Why the two-year time frame, on the other end? Because I’ve found that to be about the maximum time frame that a board, or an accreditor, or a creditor, or even a faculty can endure before a solution is reached. Again, the conclusion of the crisis will either leave you in a happier and stronger position in your institution or leave you seeking happiness and a better position somewhere else. But somewhere between six months and two years is what I have found to be the rough lifespan of an intense crisis. (This is barring, of course, a truly existential crisis as a result of which the institution ceases to exist in its current form. But even that drastic of an outcome can easily take two years or more to unfold.)

Second, what are some of the common effects, and how do you survive them?

For the sake of argument, let’s say you become aware that you are entering a crisis period, whether or not it eventually proves to be an existential one. How do you survive in the intervening six months to two years?

Let’s begin with the effects of a continuing crisis on a leader. The crisis can easily become an enormous distraction for someone who already has too much on their plate. The stress that comes with leadership increases in crisis times, with mental, emotional, and even physical effects. Exhaustion can become a daily (and nightly) companion.  Self-doubt creeps in and steals even more of the leader’s resources.

It sounds trite, but when this happens, don’t forget to take a few deep breaths – physically and metaphorically. 

Draw up a “non-crisis” item list, i.e., things that still need to be done, but aren’t necessarily at the crisis point. Now start divvying them up between and among your fellow leaders, and to their direct reports when possible. This could be an opportune time to help them grow and develop, as well as ease your load.

Along with that, begin to excuse yourself from meetings at which your presence is not absolutely necessary. Only you really know which are and which aren’t. You may still need to attend to some that aren’t technically necessary, but that may prove helpful in crisis-related activities. Again, having trusted substitutes sit in for you for a while can be a growth opportunity for them, and also demonstrate that you trust and empower those with whom you work. When it comes to meetings, which can serve to drain you even more, perhaps adopt a practice of only making limited strategic appearances. Make your participation relevant enough and just long enough to establish your presence and help you – and your colleagues – feel like you’re staying in touch.

Don’t forget to take some days off, or even vacations. Sad but true, don’t make them too long or too far away or somewhere too difficult for you to be reached. You’re probably not really going to relax completely anyway, but you should at least experience some benefit from a change in perspective and place. Frankly, you would do well to consider the health and happiness of your loved ones who’ve been going through this with you, and that they need a break, perhaps even more than you do. After all, you are able to face the crisis more directly, as well as possible enemies, while your loved ones have to suffer vicariously and without the same ability to engage.

Third, how to lead during a crisis?

There is no question that crises have deleterious effects on you, your friends and family, but also your colleagues. You undoubtedly have support and supporters (even though they may seem distant), so don’t neglect them. Their fidelity to the institution and its mission – and you – deserves appreciation and acknowledgement, even if only expressed privately. They’re worried about the institution, but also their livelihood and their colleagues as well. 

When they see you, try not to be the deer in the headlights (a situation that doesn’t usually end well in the wild). Appearing indecisive is uninspiring. But so is being overbearing or angry.

Try to be yourself as you were before the crisis. Remember to smile, relax the muscles of your face and neck, and ask them about their loved ones, their teaching, or their research. Be human. The thoughtful ones have an idea about what you’re feeling and going through, so it’s okay for them to see you as a human. You don’t have to adopt a fake effervescence, but you should avoid moping.

Seek impartial counsel. That may, or may not, include colleagues. A small group of confidants is necessary. External friends who have the courage to be honest with you, and also keep complete confidence, can be your best resource to help you gain and keep perspective. They may have higher ed experience, but not necessarily. I have always found that the best counsel comes from folks who have had real challenges, real losses, survived real attacks, and still kept their heads about them. Ones that are “too perfect” are probably not what you need at this point.

While there is a need for you to seek and obtain trustworthy counsel, you should at the same time try to avoid seeking too much counsel. Bottom line is that you’re a leader and you’re going to have to make difficult decisions. So you should accept counsel, but too much can be confusing and even overwhelming. 

Look, you’re in a tough position and no matter what you do, some people (possibly including some people you respect and care about) are not going to be thrilled. Sad but true. And some of those feelings may change over time, as they come to a fuller perspective as well.

My advice to leaders in crisis situations always includes two elements:

Can you make a decision that allows you to look at yourself in the mirror? 

Then do what you believe is right and let the chips fall where they may. Period.

While you are a leader in a profession you may (or may not any longer) dearly love, there IS an “after.”  That may mean continuing in your post-crisis position in the same post-crisis institution, or it may mean more significant changes for you.  If so, take what you’ve learned along to whatever comes next.  Partings are rarely enjoyable, but I recall a very thoughtful young person we had to let go.  His response was remarkable.  “I want to learn from this experience and become better as a result.” When I saw him at another institution a year later, he came up to me and said that’s exactly what had transpired and that he was grateful.

Your life, and your legacy, are much more than just this current time of crisis within this current institution. Be grateful to those who have earned that gratitude, and remember who you are.

Dr. Barry Ryan is a seasoned higher education executive, legal scholar, and former president of five universities. He is a senior consultant for the Edu Alliance Group and a legal scholar. With more than 25 years of leadership experience, Dr. Ryan has served in numerous roles, including faculty member, department chair, dean, vice president, provost, and chief of staff at state, non-profit, and for-profit universities and law schools. His extensive accreditation experience includes two terms on the WASC Senior College and University Commission (WSCUC), serving a maximum of six years. He is widely recognized for his expertise in governance, accreditation, crisis management, and institutional renewal.

In addition to his academic career, Dr. Ryan ​ served as the Supreme Court Fellow in the chambers of Chief Justice William H. Rehnquist and is a​ member of numerous federal and state bars. He has contributed extensively to charitable organizations and is experienced in board leadership and large-scale fundraising. He remains a trusted advisor to universities and boards seeking strategic alignment and transformation.

He earned his Ph.D. from the University of California, Santa Barbara, his J.D. from the University of​ California, Berkeley, and his Dipl.GB in international business from the University of Oxford.

Edu Alliance Group, Inc. (EAG), founded in 2014, is an education consulting firm located in Bloomington, Indiana, and Abu Dhabi, United Arab Emirates. We assist higher education institutions worldwide on a variety of mission-critical projects. Our consultants are accomplished leaders who use their experience to diagnose and solve challenges.

EAG has provided consulting and executive search services for over 40 higher education institutions in Australia, Egypt, Georgia, India, Kazakhstan, Morocco, Nigeria, Uganda, the United Arab Emirates, and the United States.