My experience had been with larger universities, and I didn't really see what the value of a small college was - until my son went to one, and I see how having small classes with very involved professors is incredibly valuable to the learning process. He loves his classes, in a way that he did not in high school. When you enjoy a class, you are more motivated to do the work, and you learn more. It's entirely possible to have a close relationship with professors at a large university, but the student has to work harder to make it happen, and it's much easier to fall through the cracks.
Second, I've read on threads here about over-recruiting that some schools have 50+ players on baseball teams because they figure it's a way to get kids into the school. I've known students who went to small colleges to play baseball, when they could have gone to the large state school without baseball. I saw it with football at some schools also. These students are getting good educations, the schools are getting good students who happen to like playing sports. I thought that the argument is that alumni who played sports are more likely to give back to the school (hence team alumni weekends). Not that the students who didn't care about sports at the time will donate more as alumni because of sports.
The question is, are the expenses worth it for the return? Maintaining a football or baseball field, buying equipment, paying a coach, etc. are not cheap. Even most D1 schools don't make a profit from their sports, including football. I'm guessing that most schools have the data to make decisions about whether having sports is bringing more money into the school than the costs.
But that's about athletics at small schools, not the very existence of small schools. Some of those are in trouble, and some are not. Certainly if the recession is very deep, families may well decide that they can't afford to pay for small private colleges, even if the education is better for their students. And, public universities have been staying afloat by attracting wealthy foreign students who pay out-of-state tuition, and that may dry up as well.