State of Play 2023
The state of higher education seems to live near a precipice, and as we enter a new year, many of us are clinging to the edge.
In the final weeks of 2019, I posted what I believed were the eight leading threats to higher education. At the time they were:
1. Market Disturbance
2. National Association for College Admission Counseling (NACAC) Changes
3. Price Sensitivity
4. International Student Decreases
5. 2026 “Demographic Cliff”
6. Poor Public Understanding of What We Do
7. Geographic Population Redistribution
8. Limited Reputation
I many ways, most remain, but their respective scale and impact have changed dramatically over the past three years.
We had our “black swan” market disturbance with the arrival of the Covid-19 pandemic, which set all of the other pieces caroming about.
We have reached a new stage of normal following the legal changes in recruiting practices (the dissolution of the old NACAC standards), which were fresh and untested in 2019. Most institutions were less predatory and most students and their families were less prone to peregrinate than many of us expected.
Following a couple of years of decline, international enrollments were decimated by the pandemic. Nationally, we have seen a gradual rebound, but it is a different market. Political challenges in China and the war in Ukraine have changed the balance of international students on our campuses and the destinations domestic students seek when studying away.
The “demographic cliff,” when we know the number of traditional college-age students will drop by about 1.1 million between 2026 and 2028 became foreshadowed as a consequence of the pandemic. Population data had projected a slight increase in enrollments between 2019 and 2026 when the 18-year-old population would continue to climb slightly before hitting a 6% and then 8% drop.
Overall population numbers have logically tracked, but in the past three years, 1.2 million fewer traditionally aged students dropped out of college or chose not to enroll. Higher education experienced the fall off the cliff, and the real cliff is still 3 to 4 years ahead.
Like institutions across all sectors, the pandemic created huge expenses and significantly undercut revenues for higher education, but many of us found significant savings from the cessation of costly programs (for us study away is 5% of our overall budget). Government relief also softened the blow.
Now that we have fundamentally gone back to normal operations, we are doing so with about 7% fewer students nationwide, and the remaining 93% have been redistributed. In Agile College, Nathan Grawe predicted that as the demographic cliff approached, not only would geographic redistributions affect enrollments by region, but a move toward flagship publics and elite independent institutions would exacerbate the impact on regional publics and private institutions outside of the U.S. News top 5o lists.
Independent colleges and universities in Pennsylvania have seen enrollment declines ranging from 6% to 25% since 2019. For tuition-dependent institutions, which is most of us, there has been a parallel drop in revenue. These decreases have occurred against the backdrop of 7+% inflation. As a result, many institutions have developed structural deficits.
A common trope on many independent college campuses has been that when a number of struggling sister institutions close, the remaining schools will take on the students they would have enrolled and reach a financially sustainable enrollment. The problem with that “plan” is that closings hurt the reputation of our sector, and our fundamental competitors are large publics, oddly not each other.
Of Susquehanna’s top ten cross-applicant institutions, only one is a four-year private. Our main competitors are Temple, Pitt, Rutgers, the University of Delaware, and our number one competitor is Penn State.
This is where we are the victims of a lack of understanding of what we do compounded by a limited reputation.
Recently, I put forward a comparison to prospective students: “In preparing for your future, do you want to have all of your classes led by expert faculty dedicated to teaching, have a faculty member serve as your advisor and mentor as you complete independent research and creative work, and develop hands-on expertise with state-of-the-art equipment and in field work, or do you want to be able to be able to say you attended 20 massive tailgate parties?”
For most students at Susquehanna, that truly life-changing first path comes at a considerably smaller out-of-pocket cost. The challenge is in helping enough of them to understand the benefits, financial and personal.
Small residential liberal-arts institutions offer a proven return on investment. They focus on the experiences and skills that best support student development and preparation for lives of consequence, and yet they struggle to maintain their share of a shrinking market.
One of the great unknowns about the coming few years is if traditional percentages of 18-year-olds will return to our campuses before the demographic cliff hits, or will we see another million+ drop compounding our current dilemma. In either case, the economics of small independent colleges and universities has rarely been so dynamically challenging.
We need to adjust our operations to align with our current resources while striving to capture a larger share of a smaller market. It is good business, but more importantly, it will be good for students.