What Higher Ed Finance Can Learn
From Bridge Builders, Civil Engineers, and Rocket Scientists

What is Modeling? 

At its core, modeling is the practice of creating a simplified representation of a real-world system to better understand how it functions and how it might respond to future conditions. Whether it’s structural engineers stress-testing skyscrapers or aerodynamics experts refining aircraft design, modeling allows decision-makers to test assumptions, mitigate risks, and plan for long-term success.

In higher education, financial modeling serves a similar purpose. It provides a data-driven framework to project revenue, analyze cost structures, and evaluate the financial impact of key decisions—from tuition changes and enrollment shifts to capital investments and staffing adjustments. According to a 2024 Moody’s report, about 30% of rated higher education institutions are facing rising credit difficulties, requiring difficult financial decisions regarding capital investments and borrowing.

Institutions that fail to model different scenarios risk flying blind, making reactive choices rather than strategic, forward-thinking decisions.

The Art of Expecting the Unexpected

When an engineer designs a bridge, they don’t just plan for sunny days and light traffic. They design the bridge to last for 75+ years, and so they know they must take many factors, including unlikely forces, into account. They model for the 100-year storm, seismic events, and maximum weight loads—because failing to anticipate worst-case scenarios could lead to catastrophic failure.

The same approach should be true for higher education institutions. Leaders want their institutions to be around in perpetuity, which means it is critical to look into the future and plan for likely and unlikely events as engineers do. While the stakes may not be as high as a well-designed bridge, higher education institutions serve thousands, if not millions of constituents from current students, alumni, faculty, staff, and local economies. This matters.

While it’s easy to assume that tuition revenue, state funding, and enrollment trends will hold steady, history shows that unexpected shocks—economic downturns, demographic shifts, or policy changes—can upend even the most stable institutions.

• Enrollment fluctuations – While recent data shows a 4.5% increase in total postsecondary enrollment in Fall 2024, driven by older first-year students, the number of 18-year-old freshmen remains below pre-pandemic levels – if this number never rebounds, how does that impact tuition revenue?

• Economic downturns and giving– The likelihood of a U.S. recession, according to the New York Fed model in 2026 is projected at 27%, raising concerns about donor giving, endowment returns, and auxiliary revenue streams. Are you prepared for instability in your funding sources?

• Deferred maintenance liabilities –– Campuses are aging, and capital needs are mounting. Does the institution have a sustainable infrastructure funding strategy? A Moody’s report estimates that about $750 billion to $950 billion is needed over the next decade to address deferred maintenance and upgrade facilities in higher education institutions. Institutions failing to model and plan for these substantial capital needs risk compromising their competitive standing.

• Shifts in financial aid dependency – If more students require tuition discounts, can the institution sustain its discount rate without eroding net revenue?

• State funding volatility – With public institutions relying heavily on appropriations, how would a 10% reduction in state funding affect operations?

• Fixed vs. variable costs – How much of the institution’s cost structure is flexible in response to revenue shifts? Are labor costs too rigid to adjust efficiently?

• Endowment spending policies – Is the endowment being utilized effectively to balance present needs with long-term financial sustainability?

Much like a bridge that must withstand a 100-year storm, institutions must model financial scenarios that anticipate long-tail risks—because failure to plan doesn’t just impact numbers on a page; it has real impact students, faculty, and the institution’s mission and sustainability.

From Theory to Reality:
Why Higher Ed Needs an MVP

Engineers don’t build full-scale bridges before testing designs with models in the lab. The business world doesn’t launch multi-billion-dollar products without first developing a Minimum Viable Product (MVP). Yet, in higher education, institutions often go all-in on major initiatives without first modeling it to understand impact and stress testing the impact on overall institution.
For example:

• New degree programs – Will there be enough student demand to sustain a program long-term, or will it become a financial drain?

• Online learning investments – How do enrollment projections for online offerings compare to traditional programs?

• Capital projects – Does a new residence hall or research facility align with projected enrollment and funding trends?

• Tuition pricing changes – If tuition increases by 5%, how will that impact yield rates and financial aid expenditures?

Bridges are Built to Last. Colleges Should be Too.

Bridges are designed to last decades, even centuries, by planning for extreme conditions well beyond everyday expectations.  Higher education institutions share a similar mandate for longevity—many have existed for centuries. However, even the most established universities can face instability if they lack rigorous financial modeling and proactive planning.

Strong Financial Modeling Leads to:

• Sustainability – Avoiding short-term fixes in favor of long-term financial health.

• Strategic decision-making – Identifying opportunities and risks before they materialize.

• Resilience in crisis – Ensuring the institution is prepared for funding shocks, enrollment declines, or economic downturns.

Just as engineers simulate every possible stressor a structure might face, higher ed leaders must model financial resilience—because when the economic equivalent of a 100-year storm hits, only the best-prepared institutions will remain standing.

Bridging the Gap Between Uncertainty and Preparedness

At the end of the day, higher ed leaders have more in common with engineers and rocket scientists than they might think. All of them are in the business of planning for the future, anticipating challenges, and designing solutions that stand the test of time.

Because when the stakes are high—whether it’s public safety or institutional longevity—modeling isn’t just a best practice.

It’s a necessity.

How well is your institution modeling for the future? Let’s start the conversation