Hundreds of small US colleges are struggling to pay their bills — and some are misusing scholarship funds and endowments to stay afloat.

Over 440 schools across the country could close in the next 10 years as they struggle to keep up with operating costs, with about 200 last year tapping into endowment funds to keep the lights on, according to higher education consultants Huron Consulting and Perspective Data Science.

Those numbers have been rising at an alarming rate.

Schools pulling from their endowments at rates higher than 7% — an indicator of financial trouble — almost doubled over the last decade, climbing to 19.3% in 2025 from 9.7% in 2016, the Wall Street Journal reported.

And the number of schools drawing from endowments at 15% tripled during the same period, hitting 5% as of 2025, according to an assessment of 1,000 schools from Perspective Data Science.

“A lot of schools are doing whatever they can to keep the lights on,” Perspective Data Science founder Matthew Hendriks told the Journal.

Those desperate measures can translate to millions of dollars in scholarship cash being used for purposes other than what the donors intended — and which schools are often legally required to put such donations toward.

Ohio’s now-closed Notre Dame College was accused in 2025 by the state’s attorney general of using more than $2 million in restricted funds for purposes other than what they were intended for, according to the Journal, a charge the school has denied.

One instance at the school allegedly included a $30,000 scholarship endowment given by the widow of a late 20-year Notre Dame professor, which stipulated the cash could only be used for scholarships. When the school closed in 2024, widow Natalie Strauss asked for the money back so she could reestablish the fund at another school — but she was allegedly told the cash had been spent.

“She told me they used it to pay the bills,” Strouse told the Journal. “I consider it theft.”

Endowments typically require permission from donors if schools want to spend them for needs other than what they were given for, or from an attorney general if the donor is no longer living.

In some instances, donors are sympathetic to school’s needs and are glad to free up their earmarked cash to help their beloved alma mater get by — but in others, desperate administrators staring down grim budgets reach into reserved funds to tide their institutions over.

Illinois’ Quincy University took $6 million from endowments “for cash flow needs” in 2025, but didn’t have permission from the attorney general, according to an audit that year.

Quincy was advised to “seek retroactive approval from the Illinois Attorney General for the endowment borrowings,” according to the Journal, a measure the school said it was committed to following while vowing “donor intent has been and will continue to be fully honored.”

Ohio’s Baldwin Wallace University moved about $20 million in restricted donor funds in 2025 without seeking proper permissions from the Board of Trustees, a 2025 audit found. Baldwin Wallace “appointed a new president and leadership team, and is implementing internal financial controls in consultation with third-party experts,” a school spokesperson said of the incident.

Small schools have been struggling in recent years as student debt has remained crippling to many graduates — many of whom often find the paydays their diplomas fetch do not meet what they spent to get them.

Tuition has also increased at higher rates than inflation in recent years, the Journal reported, and while larger universities can offset those costs with their huge donor bases smaller schools are often unable to keep up.

That’s led many struggling schools to dip into their endowments to cover costs — which experts caution is often an act of desperation.

“It’s like the guy who’s going broke and decides he’s going to take his last $1,000 and go to the racetrack,” Philanthropy Roundtable fellow Joanne Florino told the Journal. “Because he believes he’s going to win and then he can make everything better.”

“This is going to be a huge problem as small colleges close,” she said. “A lot of living donors are finding out the money they donated is not being used for what they gave it for.”