lecture hall

IVM finds heightened risk in higher education as stimulus funds expire

The EYP higher education financial health metric notes a dip in financially stable institutions as COVID-19 relief funds dissipate.

In brief
  • The EYP education practice’s metric uses financial, demand, and outcome measures for a dynamic view of an institution’s health. 
  • A new analysis of the four-year sector suggests ~50% of institutions are “stable,” down from ~70% in 2021. Pre-pandemic, ~60% of institutions were “stable.”   
  • Higher risk levels are likely related to the spend down of COVID-19 stimulus funds since FY21, bringing underlying financial health trajectories to the surface.
  • With extended stimulus funds set to expire by July 2024, institutions will need to act strategically to develop lasting foundations for financial health.

In 2022, the EY-Parthenon team released the Institutional Viability Metric (IVM) and applied the tool to evaluate risk within the four-year higher education sector. Using 2019 and 2020 Integrated Postsecondary Education Data System (IPEDS) data, our analysis showed that more four-year colleges and universities were at financial and operational risk than previously thought: roughly 20% of the four-year segment was “at risk” in both 2019 and 2020, and another 20% was flagged as “monitor.”

In the year that followed, an analysis of 2021 IPEDS data — representing the peak of the pandemic for the higher education sector — showed a starkly different picture. Due largely to the “ibuprofen effect” of COVID-19 stimulus funding, only about 10% of four-year institutions were at risk, with roughly 20% in the monitor category and the remaining 70% scored as stable. Buoyed profit margins across the landscape, driven by relief funds, were the major contributor to improved risk ratings vs. 2019 and 2020.


Given the temporary nature of stimulus funds, the latest IVM analysis finds that a contraction in market stability is underway in higher education. With FY22 data reflecting a reduction in available stimulus across the landscape (with many dollars already spent down in anticipation of FY23 expiration), only half of the four-year market achieves a stable rating. This is the lowest proportion of four-year institutions found to be stable by the IVM to date (Figure 1).


Figure 1: Institutions (2019 cohort) by IVM score, 2019–2022

Figure 1: Institutions (2019 cohort) by IVM score, 2019–2022

Note: IVM considers IPEDS’ 2019 cohort of four-year public and private not-for-profit institutions over time (2,348 institutions). Data is not shown for institutions receiving no ranking given the lack of data availability to be IVM-scored.

Below are the key findings on institutional risk from the latest analysis.  

In 2022 fewer COVID-19 relief dollars were present in profit margin equations, revealing the underlying economics of institutions. 

An institution’s profit margin carries 25% weight in the IVM, and any institution with surplus receives a stable designation on the metric. In 2019 and 2020, average profit margins by risk category were comparable and only slightly lower in 2020 overall (-2%) than in 2019 overall (2%). However, in 2021, a stark increase in average profit margin occurred across risk categories and overall (21%) as budgets were uplifted by nearly $80b from the Higher Education Emergency Relief Fund (HEERF). In general, institutions were required to spend half of allotments on student grants and remaining funds on permissible operating costs by July 2023, though some extensions into 2024 were granted. As shown in Figure 2, profit margins decreased sharply across risk categories (and to -11% on average overall) in FY22. With fewer relief funds remaining, the “ibuprofen effect” of COVID-19 stimulus on institutions’ financial positions weakened, and in many cases, actual spending outpaced available budget. 

Figure 2: Average profit margin by IVM score, 2019–2022

Figure 2: Average profit margin by IVM score, 2019–2022

Major decreases in profit margins likely drove the decline in the number of stable institutions.  

A significant decrease in the number of institutions achieving surpluses in FY22 resulted in lower overall IVM scores and meaningful shifts in risk assessments for certain colleges and universities between 2021 and 2022. As shown in Figure 3, over 75% of institutions currently considered at risk based on the 2022 IVM analysis previously achieved a stable or monitor designation in 2021. Also, nearly 60% of institutions in the monitor category for 2022 were assessed as stable in 2021. These dynamics overall reflect a declining picture of financial health for the sector, as stimulus funds expire, and an environment in which many more institutions are seeing reductions in financial stability rather than improvements. 

Figure 3: 2021 IVM scores for institutions, by current 2022 IVM score

Figure 3: 2021 IVM scores for institutions, by current 2022 IVM score

Stable institutions continue to be larger and more-selective than their monitor and at-risk counterparts. 

As shown in Figure 4, stable institutions have generally been larger, on average, than monitor and at-risk institutions in terms of enrollment. This trend weakened in 2021 — likely due to distortions in risk assessments caused by COVID-19 relief funds — but is once again evident in the 2022 IVM analysis. Additionally, as shown in Figure 5, ~95% of more selective institutions achieve a stable designation in the 2022 IVM analysis compared to only ~45%–55% of selective and less-selective institutions. More-selective institutions have also experienced more consistency in this metric over time compared to selective and less-selective institutions.

Figure 4: Average total enrollment of institutions by IVM score, 2019–2022

Figure 4: Average total enrollment of institutions by IVM score, 2019–2022

Figure 5: Share of IVM-scored institutions assessed as stable by selectivity band, 2019-2022

Figure 5: Share of stable IVM-scored institutions by selectivity band, 2019–2022

Note: Selectivity bands are based on pre-pandemic (Fall 2019) admissions rates. The share of institutions assessed as stable is based on the number of stable institutions in each selectivity band in each year divided by the total number of IVM-scored institutions in each selectivity band in each year (i.e., excludes institutions receiving no ranking). Data is not shown for institutions without a selectivity band, given unavailable admissions data.

While profit margins have worsened, averages across key nonfinancial metrics in the IVM remain stable — for now.  

As shown in Figure 6, averages for key nonfinancial metrics in the IVM have remained steady while average profit margin across four-year institutions with the data availability to be IVM-scored has declined. However, given the financial investment required to support student outcomes (marked by retention and graduation rates), the interconnectedness of student outcomes to market demand (marked by enrollment growth), and the direct influence of demand on financial position, institutions with deteriorating (or currently weak) finances will likely soon see declines in these other key metrics going forward. Should these “vicious cycles” play out, the IVM — which seeks to quantify the risk inherent in these cycles — will likely find even greater risk in the four-year landscape come 2023 data.

Figure 6: Average profit margin, enrollment growth, graduation rate and retention rate among scored four-year institutions, 2019–2022

Figure 6: Average profit margin, enrollment growth, graduation rate and retention rate among scored four-year institutions, 2019–2022

Assessing risk with the IVM allows strategic conversations to take place sooner, guiding institutions more effectively toward financial and operational sustainability. As higher education leaders face unprecedented challenges, orient themselves to new market realities, and work to chart post-pandemic roadmaps, the EY-Parthenon team will continue to reassess risk for the four-year landscape and work with individual institutions to evaluate strategic and operational options.

Casey Smith contributed to this article.


The EY-Parthenon IVM has found institutions may have a challenged road ahead of them after remaining COVID-19 stimulus funds expire in July 2024. Higher education leaders can use the IVM to assess their financial risk, and EY-Parthenon teams can help to strategize and chart next steps.