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THE ENROLLMENT CLIFF: A “Netflix Moment” for Higher Ed

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What is the higher education enrollment cliff?

American post-secondary institutions are hurting and are now bracing for another crisis yet again. Academic leaders are preparing to encounter what has become known as a cliff in traditional student enrollment. College enrollment projections anticipate numbers to plummet by more than 15% after 2025—just three short years away.

The impending cliff was initially predicted due to steadily declining birth rates since the 2008 recession. This cohort of lost babies in the years ensuing 2008 would have begun to enter college 17 years later–starting their collegiate journeys in 2025.

Number of 18-Year-Olds

Four-Year College Enrollment

In three years, the number of college-bound students is projected to decrease by 15% over the next decade due to a sharp decline in the number of births following the Great Recession. This decline, known as the “birth dearth,” was so blunt and significant that it will lead the nation over the edge of a demographic cliff (or enrollment cliff for higher ed) after 2025. Between 2025 and 2029, the number of college-bound students will decline by over 400,000 fewer students in a span of four years, an average loss of 100,000 students per year.

–Nathan Grawe’s Higher Education Demand Index

Now, enter other aggressive threats steepening the enrollment drop:

  • The COVID-19 pandemic and its budding variants have had both short- and long-term detrimental impacts on academia.
  • The widespread decline in high school graduation numbers has considerably shrunk the demographic eligible for college.
  • The recent cultural paradigm shift has made traditional degree programs less desirable to pursue.
  • The digitization of the post-secondary learning experience.
  • The increase of competition and new entrants in the education space.

Due to these unavoidable generational and social trends, it’s not surprising that the cliff is near. Higher-ed leaders must make pivotal changes to revolutionize and save the industry now more than ever.

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Beyond the Baby Bust

According to the National Student Clearinghouse Research Center, undergraduate enrollment in fall 2021 dropped 3.1 percent, or 465,300 students, compared to a year earlier. The drop is similar to the previous fall and contributes to a 6.6 percent decline in undergraduate enrollment since 2019.

That means over 1 million fewer students are enrolled in college now than before the pandemic hit.

Although most colleges have returned to some semblance of normalcy, business officers and board members still face frightening trends. To combat the treacherous terrains of the higher education landscape, institutions are taking a step back to evaluate newfangled methods to solve long-range challenges.

Two notable challenges:

  • Adapting short-term operational strategies: Despite the wide availability of COVID-19 vaccines, the omicron variant jeopardizes hopes of colleges returning to a pre-pandemic world. What this seems to mean is that operational pivots made in the early stages of the pandemic will likely remain, like infrastructure changes, shifts to online curriculum, and slimmed-down staffing. These adaptations now need to be further enhanced and memorialized in long-term plans.
  • Culture: Large droves of students are now questioning the value of college and pursuing other avenues of success – a cultural phenomenon birthed in the wake of the pandemic. Further, the value of college has been under increased scrutiny as tuition costs continue to skyrocket.

“The longer this continues, the more it starts to build its own momentum as a cultural shift and not just a short-term effect of the pandemic disruptions,” Doug Shapiro, the executive director of the National Student Clearinghouse Research Center, said in an interview. “Students are questioning the value of college. They may be looking at friends who graduated last year or the year before who didn’t go, and they seem to be doing fine. They’re working; their wages are up.”

The effects of these challenges become more evident when examining elite post-secondary institution enrollment trends. These well-established institutions have seen increased enrollment since the pandemic and don’t face the same challenges. There is less of a need to justify its value to skeptics, and they also have the financial flexibility to innovate and explore initiatives that keep pace with the evolving demands of students.

Regional four-year college enrollment between 2012 and 2029

Elite college enrollment between 2012 and 2029

Only a few states, illustrated in blue, are predicted to experience an increase in the number of students attending regional four-year colleges and universities between 2012 and 2029. The remaining vast majority will see declines in enrollment. In the red-colored states, the drop in students will exceed 15%. The dots represent large metropolitan areas. These urban college markets, such as San Diego, may diverge from their state’s or region’s trends.

Credit: Nathan D. Grawe, Carleton College

But student demand is expected to grow for the nation’s most elite colleges and universities between 2012 and 2029. The dots represent large metropolitan areas, which sometimes diverge from their state’s growth forecasts.

Credit: Nathan D. Grawe, Carleton College

Even before the pandemic, many for-profit institutions had robust online programs and delivery processes in place, which positioned them to increase enrollment during the pandemic shutdowns—and the schools that digitized, thrived. 

Digitization, The Netflix Effect

A digital transformation is a revolution that will affect every company and every sector. With pandemic shutdowns and abrupt pivots to virtual environments, it’s safe to say that we are now navigating a worldwide digital reform. At the crux of it all is the higher education sector.

We are all familiar with Blockbuster’s successor, Netflix, and how they capitalized from digitization by creating a revolutionary, superior distribution medium that enhanced the consumer content consumption experience.

Now back to higher education. During the pandemic, students were either urged to continue their education via online mediums. What started as a temporary-behavioral pattern initiated to mitigate health risks soon became a new and preferred consumption method for students—sound familiar?

“This is education’s Netflix moment.” Sean Gallagher, an executive professor of education policy at Northeastern University and founder of Northeastern’s Center for the Future of Higher Education and Talent Strategy, agrees: “This looks to be a catalytic moment. Like what’s happened with the rapid digitization of so many other areas of our daily lives, we’ve probably gained in a few months a level of interest and participation in online education that would have steadily played out over years.”

As students seek more flexibility and become more accustomed to online learning, a robust institutional digital strategy becomes more necessary to enhance an institution’s ability to compete.

Industry Challengers

In addition to the digital shift, a global survey has revealed a growing interest in shorter programs and lifelong learning. Something vastly different than the traditional post-secondary model.

Some survey highlights:

  • 68% (67%–U.S.) of all those surveyed globally agree that a degree or certificate from a vocational college or trade school is more likely to result in a good job with career prospects than a university degree.
  • At least three-quarters of respondents in every country surveyed believe that you have to keep learning after college to stay relevant in your career. This rose to over 90% in Australia, Canada, China, “Hispano-America” (i.e., Argentina, Colombia, and Mexico), and South Africa.
  • Among respondents who, once employed, felt the need for further education, many more had opted for self-training/teaching themselves via Internet resources or taken courses provided by employers or professional associations than had undertaken upskilling from a college or university.
  • Three-quarters of respondents agreed that colleges and universities focus too much on young students and need to cater more to working adults.

The Pearson survey also highlighted that this is a time of disruption, with students rethinking the kind of education that will prepare them for successful careers and the most affordable route.

“Many around the world feel education somehow isn’t working for them. It’s failing their generation, not preparing them for work, is too costly, or out of reach.”

Unsurprisingly, when there is a gap in the marketplace not addressing consumer demand, none other than Google will swoop in to fill it—no matter the industry. Google has been increasingly active in the post-secondary education space (through Google programs delivered on Coursera). The company recently announced three new six-month programs focused on data analytics, project management, and user experience design – resulting in Google Career Certificates – treating these certificates as an equivalent to a four-year degree in its hiring practices.

Google boasts affordability and quality as part of its e-learning experience, providing skills, and retraining the country’s workforce. Kent Walker, Google’s senior vice-president of global affairs, blogged that, “College degrees are out of reach for many Americans, and you shouldn’t need a college diploma to have economic security.”

Google is not the first nor the last entrant in the e-learning space, however, when such a heavy-hitter breaches your industry, leadership teams must remain alert, attentive to customer needs, and agile.

The Solution: Differentiation and Agile Planning

As we inch closer to the edge of the 2025 demographic cliff, here are critical questions you must ask:

  • Is your institution sensitive to these changes?
  • How are your demographics shifting – in the near-term and long-term – based on these trends?
  • What are you doing to meet the learning needs of new-age learners?

Understanding your institution’s odds and strategic options is critical in times of uncertainty. Amid this transformation, all institutions should challenge their existing strategies and start the conversation of how to reimagine their business in order to remain competitive.

Smarter long-range planning, better scenario analysis, more reliable sensitivity planning, and even more accurate ratio planning can all play a role. Analyze the multi-year impacts of different decisions and investments on your operations. See exactly how your financial ratios affect your ability to qualify for funding. Explore new scenarios and contingencies you may have never considered before.

Whatever you choose, make your decisions with more confidence and consensus by leveraging a flexible financial model. If you’re interested in learning how Synario can help guide your institution to a more sustainable future, just get in touch. We’re more than happy to answer your questions.