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The Current Reality
Higher education was in a nine-year enrollment decline before the corona virus pandemic. As a result, there are over 2,000,000 fewer students enrolled today compared to 2010 and over 1,300 institutions have merged or closed in the same period. While the early years of the decline disproportionately hit for-profit colleges, the last few years, and particularly 2020, have had a greater negative impact on nonprofit institutions. Even before COVID, Moody’s noted that nearly a third of all colleges and universities were operating at a deficit and they now predict five to 10% additional revenue declines for the 2021 academic year.
If the ten-year market decline in higher ed was death by a thousand paper cuts, the pandemic is the grim reaper. What most people don’t realize is how severely weakened most of higher education was before the crisis. And fall 2020 represented the greatest year-over-year enrollment decline of the entire 10-year trend. Ironically, community colleges have suffered the steepest decrease from 2019 at 10%, but the reality is actually worse because first time CC enrollments are down a whopping 23%. Freshman enrollment across all of higher education is down nearly 16% in 2020, with even larger declines among Black, Hispanic, and Native American students. New international enrollments are down an astonishing 43% compared to 2019. Possibly most concerning, this fall, 22% fewer high school seniors enrolled in college than in 2019, with low-income high school graduates failing to enroll at a rate nearly 33% lower than last year. This is one more data point showing how the pandemic has disproportionately hurt the most vulnerable in our society.
So, the situation is bleak and some substantial number of institutions will not survive the next few years. And not just because of the current pandemic, but because students were already moving en masse away from traditional higher education as the return on investment has become simply unworkable for a growing number of students. In fact, the entire credit bearing, degree granting model is at-risk as untenable debt, worsening demographics, and industry players, including really big actors like Google and Amazon take market share in the post-secondary education market. The demographic problem alone will compromise freshman enrollment for at least the next two decades, so this is not a temporary issue.
Despite this fairly gloomy picture, there are institutions that will survive and even thrive going forward. It is true that the overall higher education market will continue to shrink and could be 40% smaller in 2030 than it was in 2010. However, the post-secondary market is growing, and some institutions are actually thriving. The good news is that we know what they’re doing and it can be replicated for colleges that are up to the task.
What is Working
There are some high-level commonalities within institutions that were doing well before the pandemic, despite the industry-wide declines, and those same characteristics are proving valuable in the current crisis. In fact, many of these approaches apply outside of higher education as well. As simple as this sounds, it starts with fully acknowledging the reality and being transparent about the implications for the institution. Denial is a big problem in academe and institutions that have been brutally frank and open about their challenges have a head start. Relatedly, colleges and universities that are prepared to make foundational changes in order to meet the challenges head on have demonstrated that they fear change less than failure. Remarkably, many institutions are so wedded to the status quo that they have actually closed rather than reinvent themselves.
What Market Are You In?
The most successful institutions over the last ten years are those that clearly understand what their market opportunities are even if that means doing things they’ve never done before. That may mean shifting delivery methods or moving from credit bearing to certificate programs for from traditional curricula to competency-based education, etc. And to be clear, it is not just about adding new programs. That often creates more fixed cost. The gold standard is a market driven product strategy that supports itself with things like shared curricula, program verticals, and at least some high margin elements. As noted earlier in this article, the reality is that post-secondary education, everything after high school, is growing even as traditional higher education shrinks.
Institutional Characteristics and Culture
Not surprisingly, the most successful schools don’t look or behave much like traditional institutions. They support innovation and an entrepreneurial spirit. They embrace risk and invite change. They are comprised of staff, faculty, and management that are empowered to experiment, collaborate, and meet customer needs. They are less bureaucratic and more nimble, acting quickly to take advantage of new opportunities as they arise. They tend to partner aggressively in the interest of efficiency or revenue generation or growing market share. And possibly most importantly, successful institutions have, above all else, created a compelling value proposition for their student-customers and a financial model that includes alternative and high margin revenue streams. With very few exceptions, it is nearly impossible to run any institution of higher education today with only a traditional tuition-based revenue stream. And all of this happens because they have enlightened, game-changing executive leadership and trustees. Colleges and universities with status quo leadership, particularly if they are experiencing material enrollment declines, are frankly in dire straights.
In short, there is no secret or mysterious formula for surviving and thriving through the decline and current crisis. Although higher education has the structural problem of more supply than demand, the good news for institutions that have the courage to engage in the practices noted above is that very few of their competitors will actually choose to do what’s necessary or be capable of it even if they would like to, so those that do will have minimal competition for growing market share. Moreover, as additional institutions downsize and close, the supply-demand gap will also decrease, at least for institutions that have affordable options beyond traditional degree programs. If you would like to discuss how we can help with building your organization’s capacity to survive and thrive, including ensuring that you have adequate leadership, please contact us at email@example.com or 719-247-0486.