Higher education institutions face mounting financial challenges. Declining enrollments have led to a staggering loss of tuition revenue, with U.S. colleges seeing a significant drop in student enrollment between 2022-2024. Specifically, first-year domestic enrollments of 18-year-olds in four-year colleges declined by over 6% from fall 2023 to fall 2024. Major contributing factors include systemic financial aid issues, rising education costs, and shifting educational preferences.
Simultaneously, funding has become increasingly volatile, with unpredictable fluctuations in grants, government aid, and endowments.
Adding to the strain, inflation has driven up costs across the board—from faculty salaries to campus operations and technology investments. In this uncertain environment, the traditional budgeting process in higher education often falls short. Rigid, linear approaches fail to keep pace with fluctuating enrollments, inconsistent funding, and rising operational expenses.
According to StrataDecision.com, 66% of higher education finance professionals believe their current business models are unsustainable over the next five to 10 years. As competition for students intensifies and tuition revenue declines, institutions must embrace financial agility—dynamic forecasting, scenario planning, and rolling budgets—to stay ahead. Without the ability to pivot in real-time, they risk falling behind.
This guide equips leaders with best practices for higher education budgeting to navigate uncertainty while ensuring institutional sustainability and growth.
Budget forecasting in universities comes with core challenges that increase risk and restrict growth. Let's discuss them.
Many higher education institutions often rely on rigid annual budgets, making it difficult to adapt to changing financial conditions. With inflation outpacing revenue growth, many universities face reduced purchasing power, impacting operations and innovation.
Inside Higher Ed reported that DePaul University projected a $56 million deficit for 2023-24. The university faced a significant shortfall due to a delayed budget evaluation. The Strategic Resource Allocation Committee (SRAC) was unable to assess the budget gap and develop timely strategies.
Declining enrollments have strained tuition-dependent colleges. Inside Higher Ed reported that Penn State announced $94 million in budget cuts for 2025-26. Heavy reliance on tuition makes institutions vulnerable to demographic shifts and economic downturns.
Government funding remains unpredictable, with many institutions losing COVID-19 relief funds that had temporarily bridged financial gaps. Donor contributions also fluctuate due to economic and political factors, complicating long-term financial planning.
Universities manage diverse cost centers like research, housing, and healthcare. In 2022, Henderson State University projected a budget shortfall of $12.5 million. Its academic portfolio was misaligned with financial realities, causing all academic units to operate at a loss. The costs associated with faculty and programs were unsustainable given the declining student enrollment. This necessitated drastic measures, such as program cuts and restructuring, to align spending with actual revenues and workforce needs.
These complexities pose significant challenges for resource allocation and financial forecasting accuracy.
Institutions can better manage risks and achieve sustainable growth while fulfilling their mission. Here are four effective approaches:
Zero-based budgeting in higher education requires institutions to justify all expenses annually, ensuring alignment with priorities like student success and research. For example, the University of Kentucky implemented zero-based budgeting to allocate resources toward high-impact programs, improving operational efficiency.
Rolling forecasts enable institutions to adapt to changing conditions by updating budgets quarterly or monthly. Rutgers University shifted to rolling three-year averages for cost metrics, enhancing financial stability and responsiveness.
Predictive models identify patterns in faculty workload, course demand, and facility utilization, helping institutions allocate resources efficiently while reducing waste. The University of Arizona adopted predictive analytics to assess its deficit and take immediate corrective actions—such as hiring freezes, compensation freezes, and procurement restrictions—reducing its FY 2024 budget deficit from more than $162 million down to approximately $63 million.
Decentralized models empower individual units to manage budgets independently. This approach fosters more efficient resource allocation, as those closest to the operations have a clearer understanding of cost drivers, revenue opportunities, and program-specific financial challenges. The University of Colorado, Colorado Springs adopted an incentive-based budgeting system, aligning departmental decisions with institutional goals.
Higher education institutions face complex financial challenges, from fluctuating enrollment and unpredictable state funding to managing faculty salaries and research grants. FP&A software enhances forecasting and budgeting by enabling institutions to navigate financial uncertainty, optimize resource allocation, and ensure long-term sustainability.
FP&A software integrates budget data from schools, departments, and research centers, providing a comprehensive financial view that reduces errors, enhances collaboration, and speeds up budgeting timelines. These inputs are consolidated seamlessly, ensuring a unified budget and forecast while respecting the unique needs of different stakeholders.
FP&A platforms support tuition revenue modeling, grant forecasting, and endowment management, enabling institutions to integrate revenue projections with tuition planning. A dynamic approach continuously analyzes trends in student demographics, application rates, and economic conditions, allowing institutions to adjust strategies proactively.
FP&A software enables "what-if" scenario modeling, allowing institutions to assess the financial impact of various decisions (e.g., enrollment shifts, tuition hikes, state budget cuts, etc.). This dynamic forecasting approach helps institutions stay proactive in addressing financial challenges.
Finance teams can track department spending, grant allocations, and auxiliary revenue (e.g., housing, dining, athletics) in real-time, preventing overspending and ensuring financial accountability.
These tools help align faculty hiring with projected student demand, preventing resource shortages or excessive labor costs. For example, a university anticipating a decline in international enrollment can adjust hiring and financial aid policies proactively. Likewise, a state-funded college can model the impact of proposed legislation on financial aid disbursements.
FP&A software also supports workforce planning by budgeting for different employee types, headcounts, and salaries—crucial for managing complex staffing models. Additionally, long-range enrollment forecasting enables institutions to project student enrollment over multiple years, factoring in variables like in-state vs. out-of-state students.
Modern, cloud-based FP&A solutions integrate seamlessly with HR, finance, enrollment management, and grants management systems, ensuring a data-driven approach to budgeting and forecasting. These platforms enable real-time updates with minimal IT intervention, improving efficiency and flexibility.
In essence, FP&A software helps higher education institutions streamline budgeting and forecasting through real-time data integration, flexible planning, and scenario analysis—empowering them to navigate financial complexities with confidence.
The following five tools stand out in their ability to streamline financial planning while ensuring seamless data accessibility, accurate workflows, and strategic decision-making for higher education institutions.
Limelight higher education budgeting and forecasting solution
Limelight's FP&A software offers specialized features designed to enhance efficiency in budgeting and forecasting in higher education. It provides advanced tools for multi-dimensional planning, centralized data consolidation, and workforce management—tailored to the unique financial needs of universities and colleges. The software seamlessly integrates with existing financial, operational, and ERP systems, ensuring smooth implementation with minimal workflow disruptions.
Eliminate data silos by integrating financial and operational data across departments into a unified platform. With Limelight’s API connectors, universities gain quick, reliable access to information, enabling better collaboration and data-driven decision-making.
Limelight’s centralized data management overview
Plan across multiple dimensions, including departments, campuses, and programs. This flexibility allows institutions to view financial data holistically while drilling down into specifics for more accurate budgeting and resource allocation.
Limelight multi-dimensional planning overview
Access ready-to-use templates tailored for higher education, covering academic program budgeting and enrollment forecasting. These templates streamline planning, save time, and reduce errors.
Limelight pre-built templates overview
Optimize faculty and staff resources to align with institutional goals. Limelight accurately forecasts staffing needs based on enrollment projections and program demand, ensuring the right personnel are in place for efficient operations and better educational outcomes.
Limelight workforce planning overview
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Limelight |
Excel |
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Interactive dashboards |
No dashboards |
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Real-time updates |
No real-time updates |
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Multi-dimensional modeling |
Absent, unless you do it manually |
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Automatic Data consolidation |
Unorganized data |
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Scenario planning and analysis |
No scenario planning functionality |
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Line item details |
Absent |
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Comments linked to data |
Absent |
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Audit Trails |
Absent |
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Dynamic templates |
Limited and static templates |
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Advanced security |
Basic security |
Limelight supports institutions of all sizes, from small colleges to large universities with multiple campuses, departments, and funding sources. Its scalable framework allows institutions to adapt and expand financial planning as needs evolve.
Limelight’s pricing starts at $1,400 monthly, based on a subscription model. Organizations can start with as few as five users and scale up with additional licenses.
Unlike many FP&A solutions, Limelight’s pricing includes unrestricted functionality and data usage, ensuring cost efficiency and scalability for institutions of all sizes.
Oracle higher education budgeting and forecasting solution
Oracle Planning and Budgeting Cloud Service (PBCS) for higher education institutions is a part of Oracle's Enterprise Performance Management (EPM) suite. It’s a cloud-based platform with budgeting, planning, and scenario-modeling capabilities.
Contact the sales team for specific pricing details.
Workday Adaptive Planning higher education budgeting and forecasting solution
Workday Adaptive Planning offers financial planning solutions for higher education institutions. This platform provides colleges and universities with budgeting, forecasting, and modeling tools.
Workday Adaptive Planning offers three pricing plans:
Workday Adaptive Planning does not publicly list its pricing. Contact the sales team for specific plan details.
Anaplan higher education budgeting and forecasting solution
Anaplan provides solutions specifically designed for higher education institutions, addressing their unique planning and operational needs. The platform offers a consolidated and user-friendly software environment that enables universities to coordinate, develop, and manage financial planning.
Contact the sales team for pricing details.
Vena higher education budgeting and forecasting solution
Vena provides budgeting and planning solutions that streamline financial and operational reporting—all within a familiar Excel interface.
Vena offers two pricing plans:
Vena pricing is not publicly available. Contact the sales team for more information.
Here are key strategies that help higher education institutions achieve sustainability while managing evolving challenges.
Combining multiple budgeting approaches can balance financial stability and performance-driven funding. For example, pairing incremental budgeting with performance-based budgeting ensures both consistency and accountability.
Dean Elaine Carey of Oakland University emphasizes the need to balance financial urgency with institutional values. She suggests that blending budget models helps address challenges like enrollment declines and rising costs.
The 2022-24 Strategic Plan and Budget by the National Education Association emphasizes aligning professional development opportunities with strategic objectives to enhance decision-making and resource allocation. Equip your workforce with the skills necessary to achieve broader goals, reducing inefficiencies and boosting productivity. Train faculty in advanced educational technologies and allocate resources based on measurable outcomes, such as increased student engagement or reduced administrative workload.
According to Bain & Company’s 2023 report, institutions must rethink academic and innovation models. This can include launching new programs or adopting integrated, multidisciplinary curriculums and faculty structures. Johns Hopkins, for example, adopted this approach to expand its health-research faculty and create interdisciplinary research programs. By investing in research infrastructure, the university enabled growth in sponsored research, leading to a 7% annual increase in enrollment.
Integrate technology and automation to enhance operational efficiency. Optimize your operations by creating more flexible cost structures. Implement collaborative budgeting tools like Limelight for real-time feedback and seamless execution of innovative academic models.
Blanket budget cuts often harm essential programs disproportionately. Instead, target inefficiencies and prioritize high-impact areas like online learning and mission-critical programs. Jake Nelson from EAB advises proactive strategies such as rightsizing operations and managing long-term cost growth rather than applying uniform cuts.
Tools like Limelight provide a comprehensive financial view with granular insights to optimize spending.
The future of budgeting and forecasting in higher education will be shaped by automation, predictive analytics, and decentralized, data-driven insights. Institutions will increasingly rely on tech-powered forecasting tools to efficiently analyze enrollment trends, state funding shifts, and operational costs.
Decentralized budgeting, where departments contribute real-time financial data, will enhance agility. Additionally, scenario modeling, revenue diversification (e.g., online programs, industry partnerships), and strategic financial planning will help universities remain financially resilient in 2025 and beyond.
A modern, Excel-free FP&A solution like Limelight keeps your institution ahead with advanced budgeting and forecasting solutions. Book a free personalized demo today to explore its financial planning capabilities.