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Higher education hasn’t found its post-pandemic footing either. A combination of the pandemic, skepticism about the value of the degree in a changing labor market, and last year’s FAFSA debacle have all contributed to enrollment declines.
The latest figures from the National Student Clearinghouse Research Center show that year-over-year enrollment of 18-year-old freshmen fell by 5 percent over all. A deeper look inside the numbers shows sharper declines among certain groups of students at particular types of colleges.
Three takeaways:
1. Market position matters. As I wrote in a 2022 white paper, market position isn’t only about rankings or prestige, but rather how institutions are perceived by the audience of prospective students who they’re trying to recruit. That’s why among adult students, for example, some colleges perform quite well because they’re seen as serving the needs of those learners. Among 18-year-olds, market position is often highly correlated with selectivity in admissions. The biggest enrollment declines this fall were at what could be best described as “middle-market” colleges — those that accept at least half of applicants (very competitive, in the chart below) and those that accept at least three-quarters of applicants (competitive). The most-selective and the least-selective colleges fared the best (even though both had declines).
2. White students are no longer a driver of enrollment. White students have historically made up the largest proportion of students and have long propelled the expansion of higher ed, especially more affluent students whose parents went to college. Last fall, white 18-year-old students were the only racial/ethnic group to see declining numbers; this fall, enrollment decreased among all racial/ethnic groups, with white students showing the steepest declines.
One thing to note here: In the aftermath of the 2023 Supreme Court decision that banned the use of race as a factor in admissions, all eyes have been on those colleges where seats are scarce and applicants abundant. While white enrollment fell the most over all, at the most-selective colleges it fell by just 5 percent — the number of Black freshmen at those top-ranked colleges dropped by 17 percent.
3. Wealthier students have disappeared, too. While colleges have long tried to increase their enrollment of underrepresented students, they have historically coveted undergraduates from affluent neighborhoods (of all racial and ethnic backgrounds), as those students tend to be better prepared academically and require less financial aid. This fall, the two biggest drops in enrollment by income were among the top two quintiles.
What’s happening?
As I found in the research for my forthcoming book, families with financial means are “skipping over” a set of colleges that they would have paid full (or close to full) tuition for in the past. Higher education has trained families that they deserve some sort of discount, and they can’t now untrain them. Indeed, these families want ever bigger breaks on tuition each year and are increasingly willing to trade prestige for it — unless it’s an Ivy-plus or very selective college, which they still seem willing to pay for. This has significant consequences for colleges higher up in the pecking order of prestige that for decades were able to persuade a significant number of families to pay full price.
So what happens next? As Hemingway once said about bankruptcy, it’s gradual, then sudden.
For higher education, the gradual part is in the rearview mirror. That was the last six years. The percentage of high-school graduates who go right on to college peaked at 70 percent in 2016. In 2022, the last year available, it dropped to 62 percent. That means hundreds of thousands of young people who are not in college. Yes, some of them went into the work force, but many are also part of the one-in-five global NEETs (not in employment, education, or training). In the United States, that number is 11 percent.
This enrollment decline and the coming demographic cliff have led to plenty of predictions about colleges closing. A recent Philadelphia Fed working paper looks at past predictions of college closures — and then what actually happened — in hopes of accurately forecasting the future. The authors considered two different scenarios of enrollment declines — one abrupt and another slower drop.
The tl;dr version of that paper: If the worst-case predictions of an abrupt drop come to pass, an additional 80 colleges could be forced to shut down each year — which is almost double the average rate. On the other hand, a more gradual drop in enrollment results in only an additional five colleges closing.
Death by a hundred cuts, which we’re seeing all too often these days as colleges shutter departments and ditch majors, doesn’t help anyone.
Colleges are clearly hoping for the gradual decline but should be planning for the worst-case scenario. In recent weeks, I’ve been asked by presidents and trustees at three institutions to come speak to their boards in the new year about the landscape of higher education and how they survive and thrive in it. These three colleges represent different sectors of higher education: a liberal-arts college, a medium-sized private college, and a public flagship. The issues facing all three are different, but there was one common thing they wanted me to talk about: mergers and acquisitions.
“Mergers and acquisitions” is not quite the right terminology for us to use in higher education. There are very few acquirers in the industry. Northeastern University can only buy so many colleges. Mergers might happen more often, but in my experience, colleges wait too long to have those conversations before they’re put on a death sentence.
The better approach is deeper strategic partnerships, something I dubbed the “networked university” back in 2017. This is where colleges network together in deeper academic partnerships that include course sharing, a common platform for career services and academic advising, and further uniting their operations that don’t provide a distinct advantage, such as legal, finance, and human resources. I predict we’ll see more of this approach in 2025.
The question is whether these partnerships will be just the updated version of back-office sharing or truly new models. My hope is that we’ll see more innovative solutions in higher ed. Consider what Comcast did recently by announcing that it would spin off its cable assets into a holding company called SpinCo. Could we imagine a group of struggling colleges spinning off their weakest academic assets into a new institution that can actually take advantage of size and perhaps even invest in majors that some campuses see as distressed? Rather than each institution maintaining small departments in disciplines like languages or humanities, these programs could be combined into larger, better-resourced units that serve multiple institutions. This approach could actually strengthen these areas rather than let them wither through isolated budget cuts.
The challenges facing higher education are significant, but they also present an opportunity to fundamentally rethink how institutions can collaborate. The successful colleges of tomorrow won’t be those that simply try to weather the storm through austerity measures, but those that reimagine their operational models by focusing on their core educational mission — the value-added part of their work — while shedding or partnering on processes common across all of higher education.
Death by a hundred cuts, which we’re seeing all too often these days as colleges shutter departments and ditch majors, doesn’t help anyone. The future of higher education depends on finding a balance between preservation of the past and transformation for a new generation of learners.
This is an excerpt from the author’s newsletter, Next.
