Today’s Tuesday Reading is by Jack Wolfe, MOR Associates Executive Coach and Senior Consultant. Jack may be reached at [email protected].
I hope you love numbers as much as I do. Let me offer some, all in the pursuit of an understanding of Higher Education’s future enrollment and revenue streams and the impact that might have—enjoy!
The background, mostly in numbers
In 2008, the United States Fertility Rate (the average number of children born to a woman in her fertile years) was 2.055, very close to our replacement rate of 2.100. By 2014, it was down 10% to 1.855; by 2023, it was down to 1.784, a 13% decrease. Why? In 2008-2010, the “Great Recession,” fewer children were born in those “iffy” economic times due to questions of faith in the future and the perceived need for dual incomes to support a family adequately. Those fears/needs have persisted since and appear to be continuing.
All of you are “smart cookies” (I bet you haven’t heard that term in a while, if ever). You can see that the number of graduating 18-year-olds will decline from 2026 to 2044 as those future high school (HS) graduates are determined largely via the birth rates noted through 2023, except for the modest immigration of young adults. To translate that into numbers, recent Chronicle of Higher Education summaries of HS graduates predict a peak of 3.5M in 2025-6 and as much as a 15% decline after that – all of you have heard the term “Demographic Cliff,” and this is what that is.
Another perspective is to think of three successive cliffs
The first cliff has already occurred. Despite a growing pool of HS graduates, undergraduate (UG) college enrollment peaked in 2010 at 18.1 Million students; by 2023, it was 15.1 Million students, a drop of 17%. Included in that drop was a significant change in the percentage of HS graduates going on to a two- or four-year college. In 2010, 69% of those grads chose to attend college; by 2023, only 62% were making that choice.
The second cliff reflects our earlier discussion of “the” demographic cliff—a peak of 3.5 Million HS graduates in 2025-2026 and a decline of as much as 15% over the next 18 years.
The third cliff reflects the Census Bureau’s 2024 revision of its previous 2017 forecasts for 18-year-olds. In 2017, the Bureau forecasted the 18-year-old population in 2045 to be 4.5M (Wow!); its new forecast for 2045 is now 3.6M, a 20% drop. They say we will not see 4.0M 18-year-olds again this century.
A few other statistical notes before we draw conclusions
(1) As of 2019, the population under 18 became majority-minority, with 54% of its members classified as BIPOC. Our total US population will hit majority-minority around 2042-44, dependent upon immigration. Assuming that is directly reflected in our college populations, that change will properly cause cultural changes in many colleges.
(2) There are BIG regional differences in these population declines—the Northeast, Mid-Atlantic, and Midwest may experience declines in the 20% range, the Southwest and South 10% or less, and the Mountain and West regions somewhere between those extremes.
(3) “College Men” are becoming fewer and scarcer. In 2011, men constituted 47% of the four-year college population; in 2023, that number was 42%, and some measures show it lower. In absolute numbers, that’s at least 1.0M fewer men in the ~15M UG college enrollment mix, essentially all in four-year schools. The male/female mix is largely unchanged in two-year schools, primarily community colleges.
What this could mean for Higher Education
(1) In 2012-13 in the United States there were:
- 4,726 non-profit colleges and universities, including:
- 3,026 four-year institutions
- 1,700 two-year institutions
In 2020-21, there were:
- 3,931 non-profit colleges and universities, including:
- 2,637 four-year institutions
- 1,294 two-year institutions
This was roughly a 15% drop in total in only eight years. A few years ago, mid-pandemic, Ernst and Young looked at 2,000 colleges and universities and concluded 800 were too small to be sustainable, many being smaller rural institutions – and 20% of all those schools were running deficits. Across the nation, close to 40% of all colleges and universities have 1,000 students or less. A measure of one’s staying power is one’s balance sheet including one’s endowment. Across the US, the median endowment was only $216M in 2023. That means we have nearly 2,000 schools with less than a $216M endowment. The Economist states, with some regularity: “Consolidation of Higher Education is overdue” – are they essentially correct?
(2) The top 100-150 “most selective” schools are unlikely to be troubled by any of what’s written above or below—their product and credentialing are in such demand that they are impervious to market declines. However, 3,800 other colleges and universities could, and likely will, be impacted—planning now for this market change is clearly in order for them.
But there are tons of brilliant people in academia – can we innovate our way through this? Let me suggest at least four options to consider, and you all can add many more
(1) As you saw above, declining markets will likely force consolidation – thus, we need to ask where markets are growing. You know the answer: markets are growing internationally! In 2022, the total international market was about 250M students; in 2050, that market is predicted to be close to 600M, with the most significant growth in the Middle East and Africa. However, a cost model that differs from what we have today is needed. Today, we attract just about 1.1M international students to the US yearly, a tiny percentage of the 250M students available. Why? Because only the wealthiest of international families can afford $125K/year (tuition, room, board, and living expenses) for a residential education here. We need a low-cost product, most likely remote (or remote plus a little residential), to attract middle-income international families to us – I’ll bet academia can design a good one!
(2) Speaking of cost, many US families find our products too expensive. Why don’t we have a three-year bachelor’s degree (at 75% of current costs, plus an extra year of work life)? Think of all the empty classrooms, dorms, and other college facilities present every summer. Think of all the underemployed PhDs vying for semi-permanent adjunct positions. To me, the need and resources are there. Is there the will to change?
(3) Very few schools have great remote products, but some do – ASU, SNHU, NYU, etc. Most of our medium to larger schools have the instructional design, teaching skills, and resources to create such products. Wouldn’t it be wonderful if they could provide low-cost, high-impact teaching remotely? I hear many parents wonder how they can afford to educate their children – could this be a part of a primarily remote, maybe part residential, option that is affordable to many?
(4) Are there things universities can do to become more cost-efficient? Do we need dorms with such superb accommodations? Do we need premier athletic facilities? Do we need growth in administrative/professional staffing in higher education? Per Forbes, between 1976 and 2018, student growth was 78%, faculty growth was 92%, and administrative and other professionals grew by 308%. I fully recognize how hard people in academia work, but there are limits to the costs that parents and new markets can bear.
There you have it – a declining market for most schools except the most selective; some likely consolidation to occur; several “smart” growth opportunities, and the internal intellectual resources to deal with them – is this not far more than just an opportunity to survive, but an opportunity to thrive? Yes, but, it requires strong strategic thinking and planning and the will to do things differently – from what I know of working in higher education for 15 years plus, it can be done. I hope you all move forward to do just that!
Which best describes your institutions’ approach to the enrollment cliffs?
Last week we considered leadership toolsets and asked where you would benefit from putting focus:
- 30% said taking an inventory of your current leadership tools used
- 29% said finding new sources for leadership tools to use
- 28% said being intentional about using shared tools with others
- 13% said building a practice of adding new tools to the leadership toolbox on a more regular basis
For a majority of us – 58% – when we think about our leadership toolset, we focus on the tools we already have, making sure we know them, and are more intentional about using them. This suggests for many of us that much of what we feel we need to be an effective leader is that which we already possess – it is the intentional work of using it in the right context. However, a good portion of us – 42% – also focused on adding new tools. Of this cohort focused on new tools, roughly two of every three of us focus strategically on the sources of leadership tools while one third focus more tactically on the tool regardless of source. Our leadership toolbox needs regular attention on multiple dimensions – inventory of what we have, the practice of using it, and exploring new tools that may further serve us.