On Enrollment Turbulence, It's the Combination of Effects

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Last week on our podcast, Neil, Morgan, and I discussed the recent ASU+GSV and THE conferences as well as what makes a good or bad conference experience.

At the ASU+GSV conference and in several recent client calls, we are hearing more concern about the impact from the FAFSA fiasco, namely what will happen to enrollments starting in Fall 2024. It is good to see more organizations asking this crucial question and not just trying harder with financial aid form processing.

At the same time, it is worth pulling back and understanding that the US higher education enrollment environment is best understood as turbulence coming from a variety of concurrent forces. There are tailwinds, headwinds, and unforced errors already hitting higher education at the same time that Department of Education (ED) actions are making life more difficult for colleges and universities.

To forecast the enrollment impact of the FAFSA fiasco, it is important to see the already-turbulent environment with overlapping forces.

Tailwinds

It is worth remembering how resilient the higher education ecosystem has proven itself over the years. The GI Bill, expansion of access, online education, and Covid have all provided significant changes to higher education, stressing colleges, universities, faculty, state budgets, and students. But the overall system has remained in place, and part of this is due to some key tailwinds persistently pushing higher education enrollments forward.

• There is a preference by society for existing colleges and universities to continue operating and providing degrees. They represent a common good. But even outside of traditional degrees, there is a preference for these institutions to also provide alternative services, such as non-degree certificates.

• There is a general shift away from looking at higher education as one- or two-time discrete events leading to careers and towards lifelong learning. The need for reskilling and upskilling in corporate markets, and the opportunity for alumni and community educational experiences represents an opportunity for colleges and universities to expand their mission and to serve new student populations.

Headwinds

At the same time, there are headwinds pushing against healthy enrollments. Some of these have been growing over years or even decades, but hitting particularly hard in the early to mid 2020s. And some of these are relatively new.

• The growing burden of student debt, and the growing awareness of the debt, is hitting students and prospective students much more this decade than the last. It’s true that the national discussion on debt is flawed and missing context, but this is a real issue dragging down higher education overall.

• The Covid recovery-driven resurgence of inflation is taking its toll in a number of ways. Increasing costs for the operation of colleges and universities, financial challenges for students, and the increased difficulty in using debt to manage investments and operations.

• The demographic cliff, as described by Nathan Grawe, is forecast to hit the US particularly hard from 2025 - 2030 (and it has already started in certain regions). There are questions about whether these demographic changes are more of a cliff or a gentle slope, but either way they are a challenge pushing against healthy higher education enrollments.

• While this may be good news to many education reformers, traditional institutions are increasingly not the only game in town. There are alternative learning providers working outside the accredited, degree-based structure, and these options are siphoning enrollment away from traditional higher ed.

Unforced Errors

Not all of the forces causing turbulence are external in nature. Higher education institutions are the source of much of their own pain.

• The decades-long increase in tuition has become a net negative for higher education as well as for students. Increasing tuition discount rates cannot paper over the flaws behind the increases. And with these increased costs for students comes a reduced relevance, leading to much of the ROI discussions around whether college is worth it. Much of that discussion is flawed and difficult state budgets play a role, but higher education’s long-term push for higher tuition is largely self-induced.

• Meanwhile, what is higher education really about? What is the mission for colleges and universities, and what should their role be in the ongoing chaotic social environment? Higher education has largely lost the ability to answer those questions, which is a large part of the reason that institutions are being attacked from left and right with the campus protests over the Gaza-Israel conflict.

Context for Department of Education Actions

Which brings us back to the FAFSA fiasco and other ED actions (or failures to act). There are so many actions from ED and its allies, and nearly all make it more difficult for colleges and universities to operate. What is important here is that they are not happening in a vacuum - there is already turbulence. This means that these deliberate actions aimed at colleges and universities are adding to the turbulence, and aimed at institutions that have lost much of their ability to adjust and cope with ED regulations and actions.

It is not just FAFSA and the likely depression of enrollments starting in Fall 2024. It is also the Department of Labor’s new overtime rules, ED’s Financial Value Transparency reporting rules, and multiple actions making the deployment of online education options more difficult.

Instability

We are not in a stable environment, and the combined impact of the turbulence-inducing forces has the potential to cause significant enrollment declines.

Many, but not all, of these forces are hitting higher education institutions outside of the US as well, but particularly with FAFSA, the US is in a difficult environment.

Higher education institutions need to be more proactive in scenario-planning around enrollments and finances, looking at the combination of forces, with a particular emphasis on Fall 2024 through Spring 2026.

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