Industry expertise | October 2024 Small and mid-sized colleges (re)turn their focus to enrollment trends

Over many years, enrollment has generally followed the size of the college-aged population. As that demographic group has gotten smaller, enrollment has dropped and is expected to shrink further, leading to the “enrollment cliff” that has been projected for some time.^{Disclosure 2}

While it was a main topic for many of our conversations with higher education leaders just a few years ago, the pandemic, the scramble to adjust to remote operations, and the financial relief provided by temporary government programs kept the looming enrollment issue at bay.

The enrollment cliff is front and center again. According to the latest U.S. Census Bureau projections, the shrinkage in number of college-aged students is expected to be greater than previous estimates, even after considering immigration effects.^{Disclosure 2} Additionally, downward pressure on college demand arises from a strong job market that encourages high school graduates to delay college or forgo it altogether, reducing the supply of potential applicants. Inflation and higher interest rates combined with college tuition and fees have risen much faster than CPI for years, dragging college demand and enrollment down even further.

The factors pressuring enrollment point to concerns about the value of college—the bundle of economic, career preparation, and networking benefits that graduates derive from higher education. While these benefits can be significant—the College Board reports that the increase in lifetime earnings net of cost from bachelor’s degree over a high school diploma is more than $400,000, potential students and their families are questioning the presumptive value of a college education.³

Of all the factors, the burden of debt on individual students (and shared by the federal government when debts are deferred or forgiven) has meant handwringing around the kitchen tables of prospective students. That’s brought the value question to the forefront.

As students and their parents consider future career and income opportunities, they’re weighing return on investment (ROI) more heavily. Many students today want their education to train them for specific, well-paying jobs rather than following a more broad-based liberal arts education, which is causing some debate over the traditional credit-based education model. Whether it’s students using loans to pay for college or families stretching their finances, a path to be able to pay that money back is a priority.

Viewed through this payoff lens, engineering and computer science programs provide more financially rewarding careers, with education, humanities, and arts majors providing a lower return.⁴ No longer is providing the “college experience” enough for discerning students and their families.

Shrinking enrollment and value proposition pressures aren’t impacting every college equally—it’s small and mid-sized institutions that are feeling the effects.

Lately, highly selective private institutions have become even more selective, driven by ever greater salaries, career options, and prestige conferred to their graduates. That puts smaller, less selective colleges and universities at a disadvantage and may result in potential applicants and their parents viewing these institutions as less attractive. Flagship public schools, with relatively low tuition, are also drawing candidates from some smaller private colleges.

Highly selective private and flagship public schools are continuing to see applications increase—that leaves the shrinking demand to be borne by small and mid-sized colleges. As they grapple with reduced revenue from enrollment contraction and tuition yield management, funding to support staff and scholarship dries up. Continued program expansion and mounting administrative and oversight demands with less scale than larger institutions add to the pressure. Without the named buildings and endowment gifts that provide additional funding at prestige colleges, small and mid-sized schools can see their ability to compete for future students slipping away.

While they can invest in more aggressive development efforts or rework their plans to squeeze returns from modest endowments, small to mid-sized colleges are facing strategic choices as they rework their value proposition and look for sources to fund their mission.

That leads to questions such as: 

• Can we restructure our academic programs for greater appeal to the targeted students?
• Can we identify new student segments to pursue—academic fields enjoying increasing demand, close-by regions, or adult learners?
• What about partnering with businesses that need ongoing skill building and leadership development for their staff?
• Can we share functions with other institutions and achieve better economies of scale?

While there aren’t easy answers to any of these questions, the colleges that start asking them now and wrestling with the options afforded them will have an advantage as they need to compete more keenly for a fewer number of students.