Two Charts Showing Additional Enrollment Pressures

Particularly for entry-level positions and community colleges, the challenges are bigger than reported

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In a recent post on why enrollments and revenue are combined as the primary concern for institutions - much more so this year than in 2022 - I initially pointed out the new reality.

The stories I am reading increasing point to ‘we have a large structural deficit that is getting worse, and we have to [shut down, merge, cut departments] now’, which match what I’m seeing privately in our consulting and market analysis work. But even for institutions avoiding such cuts and changes this year, there is an attitude of ‘academic leaders must find new sources of revenue and diversify beyond standard degrees’.

Structural enrollment declines for traditional degrees are increasing in importance, despite all of the Spring coverage that enrollments are stabilizing. I’m not questioning the data from the National Student Clearinghouse, but I am questioning the framing of the Spring results.

In a subsequent post I shared some additional news stories showing the trend and discussed the positioning of generative AI as an existential issue.

You can think of this as a simplified version of Maslow’s Hierarchy of Needs as applied to institutions (or systems of institutions). At the base physiological and safety needs, institutions need reliable revenue to continue to survive, largely driven by enrollment - either directly through tuition or indirectly through state funding formulas. Needs at these lower levels must be satisfied before institutions can attend to higher needs, to paraphrase and adapt the model. If a college or university is facing a structural budget deficit driven by declining enrollments, it’s not that nothing else matters, but the primary focus must be on these base issues. At best, the higher needs can occur alongside enrollment and revenue-driven initiatives, as long there is no distraction introduced. Thus generative AI is an important and even transformational higher need, but it is not primary, despite the media hype.

Today I’d like to share two additional charts that will hopefully clarify what we are facing.

Organic Enrollments Over Time

The initial post described dual enrollment, and yesterday The Hechinger Report published a useful article describing the trend.

The number of high schoolers taking college classes has been surging for more than two decades. In what is called dual enrollment, students simultaneously earn high school and college credits from a single class. These advanced college-level courses are no longer just for gifted students who have exhausted the high school course catalog. Now they’re a tool to encourage more Americans to enroll in college by giving them an early taste of post-secondary education and a head start with a few credits.

The article also discusses our topic, which gets to the finances of institutions, where dual enrollments are different and difficult (but not impossible) to make profitable.

Another reason for the rapid expansion of dual enrollment may be financial. Dual enrollment courses are money losers for many community colleges, according to Fink at the Community College Research Center. That’s because colleges receive a discounted per-pupil allotment for each high schooler who signs up. Each state funds dual enrollment differently, often through a combination of state and school district budgets. Sometimes families need to contribute too, but it tends to be a lot cheaper than a usual college course.

But colleges can turn dual enrollment programs into a modest money maker when they serve more students, according to a February 2023 analysis by the Community College Research Center. Once fixed costs are covered, each additional student means an increase in revenues. For example, adding an additional high school teacher to an existing instructor training program isn’t very costly and could open up dozens more student slots, each generating income that flows to the college.

My initial point was that dual enrollment was a “pull forward” effect that hid future enrollment trends. Put these issues together, and it would be useful to see what organic enrollments trends look like, meaning for true postsecondary students - removing the impact of dual enrollment.

It is useful to combine this with adjustments removing the impact of sector changes, where community colleges offer a small amount of bachelors degrees and artificially change sectors.

The following chart shows the IPEDS fall enrollment changes since 2012 with and without the inclusion of dual enrollment students (by using a CCRC study linked in the Hechinger Report article). I am showing this for the Public 4-year and Public 2-year sectors, as these are the two where dual enrollment has a material impact.

If you take out dual enrollment students to view organic enrollment, then the adjusted public 4-year sector moves from a 0.7% enrollment decline from 2012 - 2021 to a 2.6% decline. The adjusted public 2-year sector has a much bigger change, moving from a 21.9% decline from 2012 - 2021 to a 31.6% decline. The total impact is that roughly there are roughly half a million more dual enrollment students in 2021 than in 2012.

I am not arguing that we should not support dual enrollment students, but I am arguing that this is a different category that is masking the organic enrollment impacts, and that this can help explain the increase in enrollments and revenue at the institution and system level as the primary concern this year.

Degree Requirements for Entry-Level Jobs

Cengage publishes an annual Graduate Employability Report, and the June 2023 version shows some remarkable changes in just the past year for degree requirements. When asked whether a company requires a degree for all entry-level positions, the response changed from 62% to 50% in just one year. The top three industries driving this change are Healthcare (down 44%), Manufacturing (down 45%), and Technology (down 47%).

A reader sent me a note after the second post calling out the impact with state governments.

After reading your July 12th article regarding primacy of enrollment challenges, I'm writing to share an employment trend that I believe will also affect higher ed by connecting the dots of state governors' executive orders and positions to college enrollments. I've been watching the actions of governors in 11 states regarding eliminating a bachelor's degree requirement for jobs in state government, unless needed for licensure. Maryland was the first in early 2022 with others following shortly thereafter. This trend has grown to 22% of our 50 states in one year.

The demand for graduates with degrees is changing, with fewer requirements, particularly for entry-level jobs. This is not all bad news from the perspective of willingness to look more deeply at skills instead of just degrees, but from the institutional financial perspective, this is another factor pushing enrollments and revenue concerns as the top issue.

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