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Higher Education’s Enrollment Bubble: A Trends Analysis

October 28, 2014 by Hanover Research


If higher education is a bubble, when will it burst?Higher Education Enrollment Bubble

The sudden decline in overall student enrollment in 2012 posed serious problems for certain institutions with regard to short‐term revenues and long‐term viability. Some missed enrollment targets by huge margins, creating panicked efforts for last‐minute summer enrollments as a means of sustaining operating budgets. A recent U.S. Census Bureau report confirmed the continuation of this decline into 2013, as college enrollment decreased for the second straight year with a drop of 2.3% to 19.5 million students enrolled. The cumulative two-year decline of 930,000 students was larger than any college enrollment decrease before the recent recession.

Observers attribute this negative trend to a decrease in the number of 18‐year olds in the overall population, the rising cost of tuition standing as a barrier to college entry, economic recovery allowing more to choose employment over continued education, and the leveling‐off of high school graduation rates. Inside Higher Ed further noted that

College enrollments typically fall or flatten when the economy improves, so the [National Student] clearinghouse’s report of declines isn’t terribly surprising (despite the relatively slow improvement in the job market, as defined by unemployment figures). But the size of the decrease is likely to be of concern to college officials trying to fill their classes to deal with increased costs or flattening state support.

The nation’s downward enrollment trend poses a number of challenges for institutions working to maximize an already finite resource pool. In its September 2014 Higher Education Outlook Survey, KPMG reported that 85% of higher education leaders are either ‘very’ or ‘somewhat’ concerned about maintaining current enrollment levels – a 14% increase from the 2013 report. Further, competition for students amongst peer institutions compels colleges to maintain spending on academic programs and amenities – which is often counterproductive in combatting the rising price of tuition and expanding education access for low-income students.

Is Higher Education One Large Bubble?

American economist Richard Vedder and the Center for College Affordability and Productivity’s Christopher Denhart have argued since 2010 that higher education produces too many graduates. Citing data on the under‐employment of college graduates – for example, 15% of taxi drivers now hold a bachelor’s degree compared to just 1% in 1970 – they believe the government needs to rethink education policies that blindly and solely subsidize bachelor of arts programs. In a 2014 reprise on this theme, they cited additional data on the declining dollar value of a degree in terms of median earnings, and a particularly strong decline of female enrollments in comparison to male enrollments. Education policy expert George Leef and others have echoed these sentiments, warning that a college degree does have some value to some people, but should not be considered “a panacea for all personal and social problems.”

Or, Are Smaller Bubbles Causing Enrollment Decline?

The Atlantic’s Jordan Weissman sees things a bit differently, however. Instead of an overall bubble, he suggests a more nuanced examination in which we recognize that for‐profit and two‐year institutions have been disproportionately affected, while public and four‐year institutions have seen enrollment growth. “All of the declines happened in the troubled for‐profit sector,” he wrote, “which has cut back somewhat on enrolling clearly under‐qualified students in an effort to clean up its image, and community colleges, which have been grappling with overcrowding in recent years.”

What Do These Enrollment Trends Mean for the Higher Education Market?

Regardless of why the bubble may burst, or even what it looks like, a decrease in enrollment translates to a decrease in tuition revenue and, for many institutions, results in an unexpected resource deficiency. To address the implications of overall student enrollment on higher education market, we uncovered the following key trends.

Enrollment Segment Market Trend
Total Student Population Overall, the proportion of the total population enrolled in higher education rose 1.7% points from 2000 to 2012, although it peaked at 7% in 2010 and has since declined slightly.
Institution Type Large master’s degree institutions and research institutions (very high research activity) remain the largest higher education sectors, capturing 16.7% and 13.7% of total enrollments, respectively.
Geographical Region Locations with the highest overall enrollment and the greatest average annual numerical enrollment gains tend to be major metropolitan areas. However, the regions with the highest compound annual growth rates represent smaller, emerging academic centers.

Sources: US Census Bureau and IPEDS

In the coming weeks, institutions will continue to report their successes and shortfalls for the 2014-15 academic year. The Chronicle of Higher Education estimates that 38% of small private colleges and midsize state institutions failed to meet their 2014 goals for both freshman enrollment and net tuition revenue. Applying market research to project future enrollment, inform strategic planning, and uncover effective strategies for diversifying institutional revenue can be effective in setting more achievable goals in future years. Further, data-driven goal setting equips administrators to more effectively respond to anticipated changes in the market and adapt recruitment efforts to fit the evolving needs of the communities they serve.

Complete the form below to download Hanover’s free report, Evaluation of Student Enrollment Trends, and gain a deeper understanding of the fears around our higher education system’s potential enrollment bubble.


About the Author:

Elizabeth Yohn is a Research Consultant for Hanover Research’s education practices based in Charlottesville, Virginia. With more than seven years of experience in education research and administration and drawing upon additional experience in applied archival and oral history from The College of William and Mary (BA ’09, MA ’13), she seeks to connect critical theories with real-world experiences toward better and more accessible education for all. Her work has been featured at conferences of the International Cultural Research Network and the American Evaluation Association.

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