The College Enrollment Crisis

0:00 When the students at Birmingham-Southern College chose their school,

0:04 they were probably thinking about its small class sizes,

0:08 picturesque campus, and competitive baseball team.

0:12 What they probably weren’t thinking about was whether

0:14 it would still exist by the time they graduated.

0:19 After all, this Alabama liberal arts college was founded in 1856,

0:24 five years before the Civil War.

0:28 Over its 168-year lifetime, it survived the Great Depression,

0:32 two world wars, and even a few pandemics.

0:36 And yet, one Friday last May it closed its doors forever,

0:41 leaving its College World Series team stranded mid-tournament,

0:45 playing for a now-nonexistent school.

0:49 Across the nation, prospective students

0:52 spend hours comparing each school’s location, faculty, campus, and courses.

0:57 (Occasionally, they even consider its cost.) Rarely,

1:02 however, do they glance at its balance sheet.

1:06 We take for granted that someone will always be around to store

1:10 our transcripts and that the name on our diplomas will hold,

1:14 if not gain, in value.

1:17 But this is not nearly as safe an assumption as you might imagine.

1:22 Between 1996 and 2023,

1:24 nearly a third of all for-profit community colleges closed forever,

1:30 according to the Federal Reserve.

1:33 That’s over 1,200 schools— about 45 a year.

1:38 Even 7% of 4-year non-profits closed over that same period.

1:44 Hundreds of thousands of students have been

1:47 affected— their plans abruptly delayed or derailed.

1:52 On average, fewer than half ever re-enroll at another school.

1:56 Just 32% have their debt forgiven.

2:00 And things are about to get a whole lot worse.

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2:15 This is the basic problem.

2:17 For decades, enrollment at 4-year universities has been steadily increasing.

2:22 But starting next school year, it’s expected to fall dramatically— by about 10%

2:29 over the first five years alone, according to Dr.

2:33 Nathan Grawe of Carleton College.

2:35 This is not about 18-year-olds dropping out to become plumbers or electricians.

2:41 True, Americans are unhappy with the state of college.

2:46 In a 2015 Gallup survey, 57% of respondents said they had “quite a lot”

2:51 or “a great deal” of confidence in higher education.

2:55 By 2023, that number was down to just 36%.

3:00 But take a look at the enrollment rate.

3:03 As you can see, a smaller share of young people are choosing

3:07 to attend— but only just barely— about 39% today versus 42% fifteen years ago.

3:16 Young people, it seems, are frustrated yet feel they have nowhere else to go.

3:22 In other words, the crisis facing schools today is not

3:26 about the enrollment rate— although perhaps they wish it were.

3:31 You can convince skeptical 18-year-olds about the value of a college degree.

3:36 But you can’t convince an 18-year-old that doesn’t exist.

3:41 And that’s the issue they now confront.

3:44 For nearly twenty years after 1990,

3:47 the average size of an American family hovered right around two children.

3:53 Then, during the Great Recession, it began to fall.

3:57 And it’s been falling ever since.

4:00 Today, the U.S.

4:01 birth rate is about half a child smaller than it was in 2007.

4:06 Well, it’s now been 17 years since the Great Recession.

4:10 And it takes about 18 years to produce a college freshman.

4:14 Which means we’re one school year away from this smaller

4:19 cohort of babies born in 2008 enrolling in college.

4:24 This year, about 4 million students will graduate high school.

4:28 By 2037, just 3.5 will,

4:31 according to the Western Interstate Commission for Higher Education.

4:36 College hasn’t gone out of fashion.

4:39 But having children has.

4:41 And that spells trouble for the institutions that depend on them.

4:46 Now, in the grand scheme of things, this may not sound catastrophic.

4:51 Surely Penn State can manage with fewer

4:54 than eighty-nine thousand students, for example.

4:57 But here’s the problem: birth rates weren’t the only thing that fell

5:03 and never recovered after the Great Recession.

5:05 During economic downturns,

5:07 state and local governments are squeezed in two directions:

5:12 there’s more need than ever for things like unemployment,

5:15 food stamps, and Medicaid— so expenditures go up.

5:19 Meanwhile, sales, property, income, and corporate tax revenues go down.

5:26 So, to weather the storm,

5:28 states cut back on nearly everything deemed “non-essential.” Bus routes are cut,

5:35 DMV lines (somehow) get longer, and good luck getting that pothole fixed!

5:41 Also on the chopping block are colleges.

5:44 Between 2008 and 13,

5:46 state appropriations for higher education fell by over $13 billion.

5:51 Sixteen states cut their funding by over 20% and six states by over 30%.

6:00 Arizona went even further: cutting its appropriations in half.

6:06 So, to stay alive, schools had a choice:

6:11 they could either reduce expenses or raise tuition.

6:15 And you can probably guess which path they took.

6:19 The thing to remember about universities is that they’re notoriously inflexible.

6:24 Every fiber of their being is predisposed

6:27 to resist change— sometimes for the better, often for the worse.

6:33 Partly this is cultural.

6:35 But it’s also economic… A school’s largest expenses are personnel,

6:40 many of which are tenured, and thus,

6:43 contractually impossible to lay off on a whim, and giant,

6:47 fixed assets like libraries and dorms, which also aren’t easy to get rid of.

6:53 Reducing expenses, in other words, is hard.

6:56 Doing it quickly is even harder.

7:00 Needless to say, college presidents don’t

7:03 become popular by making these painful cuts.

7:06 Thus, whenever the pressures of the “market” penetrate their insular walls,

7:11 the burden of restoring equilibrium usually falls on the one,

7:15 “easy” lever they can pull: admissions, and tuition, in particular.

7:21 Much easier to update a number on the website than

7:24 cancel a $20 million renovation or sell the 100-year-old library.

7:30 So, that’s exactly what they did.

7:34 This is the share of revenue schools earn

7:36 from tuition and this is the Great Recession.

7:39 As you can see, when public appropriations fell, tuition rose.

7:46 Now, these budget cuts are invariably sold at the time

7:50 as a temporary re-shuffling of priorities— a delay, not cancellation.

7:56 But watch what happens when we zoom out… After the 1990 recession,

8:02 appropriations fell, so tuition rose.

8:05 Sure, starting here, around 1998, states finally began restoring funding.

8:11 But by the time the Dot Com bubble burst in 2001,

8:16 this funding had still not fully recovered from the last downturn.

8:21 Meanwhile, this new recession caused tuition to rise again.

8:25 Then it rose again after 2008.

8:29 Since then, appropriations have started to return,

8:32 but again, not nearly as fast as they fell.

8:36 A full decade after the 2008 recession,

8:38 state spending was still down by a quarter in Texas,

8:42 a third in Mississippi, and a whopping 54% in Arizona.

8:48 The money just never came back.

8:51 Over the long term, the trend is clear:

8:54 the burden of paying for college has moved in only one direction.

8:58 Each recession permanently shifts more of the cost

9:02 from the public at large to individual families.

9:06 Take the University of Washington, for instance.

9:10 In 1989, the school received 20,674 inflation-adjusted dollars per student.

9:17 Thirty years later, in 2021, it still received about $20,000.

9:23 But the state of Washington went from covering 80% of that cost to just 38%,

9:32 with students paying the difference.

9:35 So dramatic was this shift that a few

9:38 “public” schools are basically public in name only.

9:41 The University of Wisconsin–Madison, for instance,

9:45 receives just 14% of its funding from the state of Wisconsin,

9:50 while UT Austin is down to 11%.

9:53 What this means is that even schools expressly created to educate, enrich,

9:58 and serve their own residents

10:01 have effectively transformed into hyper-capitalist, quasi-corporate enterprises.

10:07 After all, the money’s gotta come from somewhere.

10:11 And “somewhere” means the pockets of local families.

10:14 When that fails, it means out-of-state students,

10:17 who typically pay two or three times as much for the same education.

10:22 And when even those run out, it means international students,

10:26 who are often treated like cash cows.

10:30 Now, for the last 17 years, this model has served colleges well.

10:35 Sure, parents complained about the rising cost of tuition

10:39 but they still dutifully mortgaged their homes to afford it.

10:44 And yes, a few eyebrows were raised

10:46 at the absurd lengths schools went to attract full-price-paying students:

10:50 from luxury dorms to lazy rivers to climbing walls and golf simulators.

10:58 But hey, the lights stayed on, and professors got paid.

11:02 As far as their balance sheets were concerned, things were going just fine.

11:08 The problem, of course, was that schools had become incredibly fragile.

11:13 Since students were now footing most of the bill,

11:16 even the loss of a few of them could cause serious trouble.

11:20 Schools didn’t just become extremely dependent on tuition revenue.

11:24 They did so at the exact moment birth rates fell— 2008—

11:30 laying the foundations for a demographic time bomb 18 years later.

11:35 And today, it’s finally about to explode.

11:40 In other words, schools now find themselves back where they were in 2008.

11:45 This time the problem is twofold: lower state funding and declining enrollment.

11:52 But the effect is the same: a budget shortfall.

11:57 Of course they could take this opportunity to reduce expenses.

12:01 They could finally stop and do some painful but necessary soul searching,

12:06 asking difficult questions like how best to fulfill their missions and deliver

12:11 a quality education at a price the average family can actually afford.

12:16 They could trim their bloated administrative

12:19 budgets and forgo their extravagant amenities.

12:22 But that’s not what they did after 2008.

12:27 Or 2001.

12:28 Or 1990.

12:29 So, if history is any indication,

12:31 they’ll do what they’ve always done— you guessed it— raise tuition.

12:37 That’s right: college may get even less affordable.

12:41 Now, some schools will be just fine.

12:45 These— your Columbias and your Johns Hopkins— are what author Jeffrey

12:51 Selingo calls “sellers.” Their prestigious names

12:53 draw students from around the country.

12:56 They receive far more qualified applications than they have seats in each class.

13:02 And this allows them to name practically any price.

13:06 Ironically, these same schools that can charge nearly six

13:09 figures a year are also those that least need to.

13:13 Their massive endowments make them far less dependent on tuition revenue.

13:19 The problem is, by definition,

13:21 there aren’t that many of them— that’s what makes them so desirable.

13:26 Sellers represent a tiny, tiny fraction of the market for higher education.

13:33 Just 10% of schools accept less than half of all applicants.

13:37 And only a few of those are highly selective,

13:41 with acceptance rates of 20% or less.

13:45 The vast majority of schools— 67%— accept virtually everyone who applies.

13:51 They have to.

13:53 These are your “buyers.” Since buyers

13:56 don’t have nationally recognized brand names,

13:59 they recruit almost exclusively from their surrounding region,

14:03 state, or even town.

14:05 60% of all freshmen, after all,

14:08 attend college within 50 miles of their hometowns.

14:12 This means they have a very limited pool of potential applicants.

14:16 They rely on their local communities

14:18 and their communities rely on them— for tax revenue,

14:23 for employment, for migration, and economic activity.

14:27 Meanwhile, these same schools are overwhelmingly small.

14:32 And thus, overwhelmingly fragile.

14:34 75% of all colleges have fewer than 5,000 students.

14:39 And a third have fewer than one thousand.

14:42 In other words, nearly a thousand universities across

14:45 the country enroll fewer than 250 new students a year.

14:50 Therefore, if just twenty-five fewer students enroll next year,

14:54 that class will generate at least 10% less revenue.

14:59 A few dozen students here or there can make or break an entire university.

15:06 And, needless to say, many schools will lose a lot more than a few dozen.

15:13 University of Pennsylvania Professor of Education Robert Zemsky estimates

15:17 that about “20%” of all schools face “substantial financial risk.” Likewise,

15:23 one consulting company estimates that 560 public and non-profit

15:28 4-year universities are “at serious risk” of potential closure.

15:33 Colleges are about to experience a painful reckoning.

15:38 …Which means students should start asking the uncomfortable

15:41 question those at Birmingham-Southern College surely wish they had:

15:46 will this school still be around by the time I graduate?

15:50 17-year-olds need not become experts at reading balance sheets.

15:54 But if you’re applying to a small school, for example,

15:58 you might consider checking whether enrollment has been on a long-term decline.

16:03 You might also consider diversifying your education.

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