Tag: College Enrollment

The Coming Disaster for America’s Colleges

The Daily Escape:

New Navajo Falls, Supai, AZ – 2020 photo by wanderin-wally. These falls were formed by a flash flood in 2008.

Colleges and universities are scrambling to figure out what to do this fall if their students can’t return to campus. Some students are reconsidering going to college. If they don’t return, what will happen to schools that are tuition-dependent?

Even before the pandemic hit, student enrollment for the spring 2020 had fallen for the ninth year in a row. Wolf Richter reports that the number of post-secondary students fell by more than 83,800 students (-.05%) to 17.18 million students. Worse, compared to the spring semester in 2011, enrollment is down by 10.6%, or 2.03 million students. Here’s Wolf’s chart:

Demo Memo says that college enrollment in the United States peaked in 2010 at just over 21 million, and as the chart shows, it has drifted downward ever since. For 2020s spring semester enrollment declined in all sectors compared to spring 2019:

  • Public two-year: -2.3%
  • Private for-profit four-year: -1.9%
  • Private nonprofit four-year: -0.7%
  • Public four-year: -0.6%

Public two-year schools have seen a 25% drop in enrollments since 2011, while enrollment in private for-profit colleges is down 55.2% for the same period.  The drop in for-profit enrollment accounts for 44% of the total drop in enrollment in all institutions since 2011.

Nathan Grawe says in the Harvard Business Review that demographics will not be a friend to higher education in the future:

“….since the onset of the Great Recession in 2008, the total fertility rate…has fallen by almost 20%….Tracing forward 18 years from the 2008 recession, we can anticipate a sizable decline in prospective college students beginning in 2026.”

He says that two-year colleges and non-selective four-year schools can expect to see falling enrollments, because these schools serve a demographically representative subset of students, so they will face the inevitable demographic arithmetic. This will be true particularly in the Northeast and Midwest, where declines are already well underway.

This will lead to price competition, which is precisely what Scott Galloway, professor at NYU’s Stern business school said on CNN recently. Galloway points out that schools in the top tier (Like Stanford, Oxford, Harvard and MIT) have deep waiting lists, and therefore will not be damaged by a smaller pool of college-age students. This means that the top-20 universities globally are going to become even stronger, as will universities between numbers 20 to 50.

At the other limit, for the Tier III schools who are tuition-dependent and who have no wait list, there will be carnage. The Upshot wrote about a college consultancy called Edmit that follows financial solvency of colleges:

“Edmit examined financial trends at 937 private universities and added a conservative estimate of the Covid-19 impact: tuition losses of 10% in 2020 and 20% in 2021, a 20% decline in endowment earnings, and an offsetting 10% reduction in spending on salaries.”

Their work shows that the number of colleges ranked with “Low” financial health (defined as being on track to run out of money within six years) was 345, more than one-third of all private colleges studied.

Beyond demographics, the fundamental question is today’s perceived value of a college degree. An MIT degree may be worth $250k in tuition, but is a Boston College degree worth that?

Since 1998, overall inflation is up 54%, while college education costs are up 150%. There’s now more student loan debt than credit card debt. Former students are in the hole for $2 trillion in student loan debt, a lot of which may eventually need to be written off. And the average price of a textbook has increased 812% in the last 30 years.

Galloway says that higher education has raised its prices at a faster rate than the health care industry! This, for a product/experience that is substantially unchanged in the past four decades.

The four-year public schools will survive, because they provide a better price-to-value proposition than the mid-tier private schools.

Dozens, maybe hundreds, of private middle tier schools will close, or partner with other schools, or possibly with businesses. They face huge price pressure, with many competitive alternatives available to the dwindling pool of students.

Many of the third-tier private, tuition-driven schools will simply shut down, continuing a trend that is already under way.

Change is sometimes the only way to make a service more efficient and affordable. The physical store is on the verge of disappearing. The physical office is disappearing. Similarly, colleges and universities need to understand the economic logic they’re facing, or else Mr. Market will educate them.

The questions to wrestle with are:

  • Is the statement “everyone should/needs to go to college” still true?
  • Does higher education still require a physical presence to be effective?

If the paradigm changes, what should it change to?

Facebooklinkedinrss

College Enrollment is Down, Student Debt is Way Up

The Daily Escape:

Cathedral Rock at sunset, Sedona AZ – 2019 photo by microadventures

The Student Clearing House reports that the college student headcount of undergraduate and graduate students combined fell by 1.3% in the fall semester of 2019 over the same semester last year. That equals 231,000 fewer students compared to 2018.

This is the continuation of a long decline. The peak year was the fall semester of 2011, when 20.14 million students were enrolled. Since then, enrollment has dropped by 10.8%, or by 2.17 million students. Here’s a helpful graph by Wolf Richter:

The report covers 97% of enrollments at degree-granting post secondary institutions that are eligible to receive federal financial aid. It does not include international students, who account for just under 5% of total student enrollment in the US.

Women by far outnumbered men in total enrollment in the fall semester of 2019 with 10.63 million women enrolled, compared to 7.61 million men, meaning that overall there are now 40% more women in college than men.

Inside Higher Ed reports that community college enrollments declined by 3.4%. Four-year public institutions saw a drop of 0.9%. Four-year private institutions bucked the trend with an increase of 3.2%. However, the Student Clearing House said most of this increase was due to the conversion of large for-profit institutions to nonprofit status. Grand Canyon University, for example, successfully made the transition last year.

Wolf Richter says that the 10.8% decline in enrollment since 2011 comes even as student loan balances have surged 74% over the same period, from $940 billion to $1.64 trillion:

Looking at the two charts, it’s clear that over the last eight years, enrollment has declined in a straight line at about 1.35% per year. And over the same eight years, student loan debt has increased in a straight line at nearly $90 billion per year!

We’re seeing three trends: First, the decline in enrollments. Second the decline in men attending college. Third, the soaring costs of college leading to soaring student debt.

No one has the answers to all three, but the decline in enrollments may have a demographic element. We are approaching the tail end of the college-aged millennial generation. Higher education has been facing demographic headwinds for a decade. The post-millennial generation is simply smaller than the previous generation.

Meanwhile, a big part of the enrollment peak spike in 2009-2012 period was due to people choosing education to avoid unemployment during the Great Recession. And 25% of the enrollment decline is due to the for-profit diploma mills losing their government support after years of robbing their “students” blind.

The rapidly increasing costs of college are a burden that can also drive down enrollments. The numbers do not favor investing in a college degree as much as they used to. Back in the day, a good entry level job’s salary was about 4 times the annual tuition. Now it’s under 2 times. If you check out some of the terrible numbers for 20-year net Return on Investment (ROI) on payscale.com, it’s clear that many colleges and universities have negative or relatively small ROIs.

OTOH, there’s still a massive income gap between people with a college degree and those without one. And outside of a few small business owners, there’s no way around it. College is the only reliable way to get into the middle class, and stay there.

The college industrial complex knows that it has a stranglehold on your future, and it will try to suck as much money out of you as possible.

The solutions involve some of the things that Sanders, Warren and others are talking about. Wrongo is for making college free for all. He isn’t for debt forgiveness, but for granting interest-free loans to students. Those loans should be carried only by the federal government.

Cost containment is the biggest issue. Online education is now readily available, and saves on both tuition and room and board. The economy is stronger, so on-the-job training is returning, and a lot of specific how-to knowledge is now available online.

Except for the male-female imbalance, much of this is solvable.

Finally, higher education serves many purposes in our society. As a people, we need it for its practical value, but also for sharpening our ideals, nurturing our growth, advancing our knowledge, and our arts.

Despite a popular subculture of anti-intellectualism and doubt, we should still know that a people without ideals are lost.

Facebooklinkedinrss