Penn State closes branch campuses as demographics sink in
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The Pennylvania State University’s board of trustees has voted to close seven of the school’s branch campuses.
The May decision underscores how factors plaguing the higher education sector — declining enrollment, rising expenses, oversupply — are affecting even the country’s largest universities.
“We have a challenge to make sure we have the right size of an institution,” said Jay Paterno, a member of the university’s board of trustees, “and also convincing the public, at large, that there is a value to higher education.”
The university has 20 branch campuses, known as commonwealth campuses, and the board voted to close seven of them. Because Penn State is a state-affiliated university, the closures must now be approved by the state Department of Education.
The campuses will remain open for two years, slated to close in 2027. The university is considering what to do with the facilities after the closures, Paterno said.
The decision to close the campuses was met with opposition from students, faculty and state lawmakers. Ahead of the vote, five board members, including Paterno, published
“The data around the commonwealth campuses suggest that we are losing roughly $40-$50 million per year operating them,” the editorial said. “That seems like a big number, but in an operation with a $10 billion budget, that amounts to a 0.4% investment in the commonwealth.”
The satellite campus tumult comes as Penn State has a $580 million negotiated bond deal on the calendar. The deal, slated to price this week according to an online investor presentation, will consist of $520 million of tax-exempt bonds and $60 million of taxables.
BofA Securities is the bookrunning senior manager, with Barclays, Morgan Stanley and Stifel as co-managers.
PFM is municipal advisor. Greenberg Traurig, LLP is bond counsel.
Ahead of the deal S&P Global Ratings affirmed its AA rating of the university and S&P Global Ratings and Moody’s Ratings maintained its A1 rating. Both assign stable outlooks.
S&P analyst Kenneth Rodgers noted that the school has good liquidity, moderate debt levels and solid enrollment trends.
The bonds are “to be used by the University for various capital projects, including renovations to Beaver Stadium at University Park and construction of the Applied Research Lab,” as well as refunding two series from 2015, according to the EMMA filing.
The renovation of 106,000-seat Beaver Stadium at the flagship State College campus, where the university’s football team plays, is expected to cost $700 million, and last year,
Penn State has been issuing bonds on behalf of the renovations since 2023, when the board of trustees approved the plan. At the time, the university said the costs would be
The commonwealth campuses scheduled to close are in DuBois, Fayette, Mont Alto, New Kensington, Shenango, Wilkes-Barre and York. They have a combined enrollment of around 3,200 students.
“Keeping them open would require an estimated $19 million in annual financial support, $21 million in annual overhead expense, and more than $200 million in future facilities investment—resources that could be redirected to enhance and strengthen the campuses that remain,” a
Beyond concerns for revenue, the report noted that the low enrollment at the closing campuses could hurt “the kind of robust on-campus student experience that is consistent with the Penn State brand.”
Rodgers said the decision is logical, and not unusual in higher ed institutions under the sector’s current conditions. The campuses aren’t large enough that their closure will make much difference in the bigger picture of the university’s finances, he added.
“They’ve gone to great lengths to lessen the potential impact to those affected, basically agreeing to keep the campuses open, I think, for two years,” Rodgers said. “They’re taking what would probably be considered very prudent, you know, actually very considerate steps in this whole process.”
Paterno said he’s accepted the board’s decision and acknowledges the difficult environment for universities.
“There were differences of opinion on it, but now that decisions are made, we have to go forward,” Paterno said.
Six state lawmakers from Schuylkill and Hazleton issued a
Pennsylvania State Senate Majority Leader Joe Pittman, R-Indiana County, whose district would lose the Penn State New Kensington campus, expressed concern for the future of the properties.
“This is a responsibility the University bears, and their efforts must be supported by the state,”
The higher education sector has had many closures, mergers and defaults in recent years. This year is the start of the “demographic cliff,” a steep decline in the college-aged population.
Analysts give the higher education sector a bifurcated outlook — large and elite universities have enough demand that they’ll be able to withstand the drop in prospective students. But many smaller, less selective institutions won’t survive.
Penn State is experiencing both ends of the bifurcation. Its main campus is actually on track to grow enrollment by 10,000 students in the next five years, Paterno said. But its commonwealth campuses have been mired in the oversupply and demographic shifts that closed many Pennsylvania institutions in the last few years.
“I’m sure [Penn State] is basically trying to ensure that they’re able to do everything in their power to maintain their stable enrollment,” Rodgers said. “Every school in the Northeast is trying to do that.”
Enrollment at the commonwealth campuses has decreased by a third since 2010, according to the report that recommended the closures. For the twelve worst-performing campuses, enrollment dropped by 35% over the past decade alone.
The difference in performance between different commonwealth campuses partly “depends on geography,” Paterno said. Some of the campuses are performing very well, he added and “some could use a little boost from us.”
But the challenges are also statewide, he said. Pennsylvania has a worse oversupply of higher education institutions than most states and, according to the report, it’s “among five states expected to account for three-fourths of the national decline in high school graduates.”
The university tried investing in the struggling campuses, the report argued, and saw few returns.
“Examples of investments include $16.6 million for the PAW center at Penn State DuBois, $14.3 million for the Kostos Building project at Penn State Hazleton, and $13.5 million for the Allied Health Building at Penn State Mont Alto,” the report said.
The report said the closures will help the university invest in its remaining commonwealth campuses. Penn State President Neeli Bendapudi has committed to maintaining the university’s presence in Pennsylvania’s northeast and the Pittsburgh region.
The university’s strategy resembles what many schools are trying, Paterno said. It’s leaning into in-demand majors like nursing, engineering and business, renovating athletic facilities, and offering programs besides a four-year bachelor’s degree. One of the school’s commonwealth campuses offers trade certificates through an affiliation with the Pennsylvania College of Technology.
Penn State will also have to weather the rocky state and national policy environment, Rodgers said. State funding makes up less than 5% of the university’s revenue, he noted.
The school will likely suffer from federal immigration policy hurting international student demand. International students are more than 10% of Penn State’s enrollment, Paterno said. Plus, Rodgers added, they also typically pay full tuition.
Penn State Athletics will also have a revenue crunch from recent NCAA policy changes.
Revenue sharing rules will be difficult for Penn State, since the athletics program has been more or less breaking even for the last six years, Paterno said. Combined with the name, image and likeness settlement, Paterno estimates that the athletics program will have about $30.5 million in new annual expenses over the next decade.
