Higher Education's Perfect Storm: Falling Enrollment, Rising Costs, Surging Loan Debt
If the world of higher education were a weather system, two major fronts of concern would be active right now. The first, which is well known among those aspiring to attend college (and those already in school) is cost. College costs are increasing at a rate that far exceeds inflation, and the increases rarely exhibit any rational cause-and-effect logic. You won't encounter too many people who are commenting about what a good "buy" college is these days.
The second front is much less obvious and is almost stealth-like in nature due to the scrambling efforts of the colleges involved to keep a lid on its reality. Enrollment is falling. That's bad news on a number of levels. Obviously, enrollments are directly tied to revenues. Falling enrollment endangers a college's existence, and more than a few colleges have closed their doors recently, but you may not be aware of how many there are. That's the stealthy aspect.
As my title intimates, these two fronts are merging in a perfect storm for higher education. I've written at length many times about the perils of student loan debt. Now, as the data show, the cautions about -- and even the fear of -- massive loan debt is causing prospective collegians to pause before committing to enrollment. In some cases that commitment never happens.
Enrollment on the Decline
An excellent examination of this situation came out Monday in a WolfStreet.com article, College Enrollment Skids for 8th Year in a Row in 2019, But Student Loans Skyrocket. What Gives? by Wolf Richter. I'd like to highlight the key points so you may become more aware of the winds swirling around the realm of higher education. Richter sets the stage:
With college costs blowing through the roof, with "luxury student housing" and not so luxury "student housing" having become asset classes – including, of course, CMBS, now in rough waters – for global investors, with textbook publishers gouging students to the nth degree, and with the monetary value of higher education questioned in more and more corners, the inevitable happened once again: College enrollment dropped for the eighth year in a row.
The post-secondary student headcount – undergraduate and graduate students combined – in the fall semester of 2019 fell 1.3% from the fall semester last year, or by over 231,000 students to 17.97 million students, according to the Student Clearing House today. In the fall of 2011, the peak year, 20.14 million students had been enrolled. Since then, enrollment has dropped by 10.8%, or by 2.17 million students ... The 10.8% decline in enrollment since 2011 comes even as student loan balances have surged 74% over the same period, from $940 billion to $1.64 trillion ... The situation with for-profit colleges is much worse.
Another statistic that hasn't been publicized, and which may even qualify as "stealth" data is the disparity between men and women enrollments:
… Women by far outnumbered men in total enrollment in the fall semester of 2019 with 10.63 million women enrolled and just 7.61 million men, meaning that overall there are now 40% more women in college than men:
- At public four-year schools, there were 30% more women (4.51 million) than men (3.48 million)
- At private non-profit four-year schools, there were 50% more women (2.32 million) than men (1.54 million)
- At private for-profit four-year schools, there were more than twice as many women (508,000) than men (241,000).
- At public two-year schools, there were 38% more women (3.11 million) than men (2.26 million).
Over the past three years, enrollment has declined for both men and women, but faster for men (-5.2%) than for women (-1.4%). Since 2011, enrollment has declined by 13% for men and by 9.4% for women ...
Strange things are happening inside the ivy walls, but many (shall I say "most"?) students and their families are unaware of the cumulative impact of these evolving trends. Of course, the cost of college and its attending debt is well known. If you would like to see some truly sobering facts about that, check out The State of the American Debt Slaves, Q3 2019, where you'll read this:
Student-loan balances jumped by 5.1% in the third quarter compared to Q3 last year, or by $80 billion, to a new horrifying record of $1.64 trillion, having skyrocketed by 120% in the 10 years since Q3 2009, according to Federal Reserve data released Thursday afternoon. Over the same 10-year period, when student loans soared 120%, the Consumer Price Index has increased 19%. Student loan balances are 7.6% the size of GDP, up from 5.1% in 2009 [my emphasis] …
Consider Why Enrollments Are Low
Why are enrollments falling? Why is there a paucity of men in student bodies? Richter posits:
… The overarching theme is the horrible expense of getting a higher education, as each layer element in the University-Corporate-Financial Complex extracts its pound of flesh, largely funded by parental sacrifices and by student loans, which are a mix of taxpayers funds when the loans default and students' future sacrifices when the loans don't default. The vision of a pile of student loans for years to come act as a discouragement to students who spend more than two minutes thinking about it …
… The declining proportion of men among students has long been observed. That women flock to higher education is a great thing, but why did men bail on the system in such large numbers? This is subject to endless and wide-ranging discussions. One explanation that has been offered, and only a partial one, and only covering the past few years, is the relatively good job market where young men decided to forgo a higher education and instead enter the workforce after high school – and that makes sense in many cases, especially if it involves learning a trade …
My opinion about the decline of men enrolling in college relates to the strong economy. For many, the tradeoff is simple: Should I go into deep debt for a four-year degree that may or may not pay me back with a great job, or should I get a job now and begin building my nest egg with at least a four-year head start? It may be a simple tradeoff, but one that could pay big dividends.
The comments following Richter's article are worth reading. Some time ago here, I predicted what I termed as a "sea change" in higher education. We're starting to see the whitecaps now. Coming soon, we may see the SAT and ACT become an obsolete admission criterion. More small private colleges are in dire financial straits. The cumulative student loan debt situation has become untenable. And, much to the dismay of many middle-of-the-road students and families, a high number of campuses have become culturally radicalized, promoting highly charged political philosophies.
It will be interesting to see how this storm plays out. The upper-echelon schools will remain in place with business as usual: Many more applicants than open slots. The others may have to make some dramatic decisions to stay afloat and some will go under as others already have. These are stressful times for college administrators who are always checking to see which way the wind is blowing.