The Canary in Higher Education’s Coal Mine

Last week, Melissa Korn reported in the Wall Street Journal that Oberlin, the University of Chicago, George Washington University, Washington University, and Rensselaer Polytechnic Institute, among others, have extended their January application deadlines.

She notes, “Some offered the extra time only to seniors who began but didn’t submit applications. Others sent broad blasts after buying students’ contact information from standardized test companies.”

Explanations for these decisions varied but the two most common were the increasing competition among highly selective colleges and universities and the stress that students place themselves under during the application process.

Students note with anxiety the low acceptance rates at elite American institutions; indeed, according to the WSJ, an astonishing “35% of seniors applied to at least seven schools in 2016, up from 18% a decade earlier. In that same time span, the yield, or share of admitted students who enrolled at a given four-year college, fell to 34% from 45%.”

Ms. Korn offers two conclusions:

  • Delayed deadlines are a sign of the growing pressure many schools face to fill their incoming classes, and
  • Application deadlines indicate a broken process, with colleges increasing the volume of applications but still rejecting many qualified candidates.

She further surmises that higher education institutions behave this way because they must meet their enrollment targets to make their annual budgets. And that’s the problem in a nutshell. Enrollment is both a science and an art, but it presumes a stable marketplace with a growing population of students from which to choose.

The art of enrollment, together with changes in the marketplace, makes the science of enrollment especially difficult. It’s hard to be precise when the foundation of prospective students is so shaky.

The Wolf Is At the Door For All Higher Education

There has been a great deal of discussion lately about the spate of college closings and mergers, in both the higher education media and in regional news sources, especially in the Northeast. Many of the arguments made about these closings suggest that demographics, poor management, and rising tuition overmatched by steep financial aid discounts, effectively forecasts the closings and mergers.

What has largely escaped attention, however, is that the problem is not the so-called “bottom feeders” in higher education but more of a systemic issue that is beginning to affect all levels of quality, pricing, and perceived rank.

If this is true, there are some indicators that stand out as a warning to higher education, especially four-year undergraduate institutions:

  • Almost half of the first-time college-going student population begins or has already had experience at community colleges.
  • Financial aid discount rates are above 65% at many heavily-dependent tuition-driven colleges, including a good number with strong reputations and storied histories.
  • Elite universities, with sticker prices approaching $75,000 per annum, compete for an increasingly smaller pool of ZIP code-primed recruits, relying heavily on merit aid to discount even for their top students.
  • Many others focus on increasing the number of international students and their accompanying full-tuition payments — a risky proposition given the political dysfunction surrounding immigration policy.

The application deadline delays at America’s elite universities support the conclusion of one highly-respected CFO, who told me recently that “the wolf is at the door” for all of us, with only the circumstances differing among higher education institutions.

It may be that consumers are forcing a shake-out among even the most elite schools, with only a handful ultimately remaining who will be able to charge what a shriveling application market will bear. If so, it will likely be some mix of reputation, endowment-backed financial aid policy, and consumer-perceived differentiation that will protect their version of the status quo.

The End Isn’t Near But “Business as Usual” Isn’t Working

Yet it is shortsighted to stammer around claiming that this is the end of the residential college or that degrees will give way to certificate programs. But it suggests that the era in which pricing policies, backed by greater financial aid discounts, are coming to an end.

In recent times, most higher education officials assumed that some combination of new programs, expanded enrollment outreach, efficiencies and economies of scale, and better marketing would improve their situation, at least incrementally. But the problem is the incremental nature of this approach.

Incrementalism Will Not Make Colleges More Sustainable

Each institution will need to find its own unique solution to how to become a more sustainable place and do so at an orderly pace. The colleges and universities that recognize that incrementalism won’t work are the most likely to be nimble and agile enough to prosper.

But make no mistake about it. The future of American higher education on balance is a bright one but only if America’s colleges and universities are willing to face and shape it.

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Brian C. Mitchell

Brian C. Mitchell

Founding partner of Academic Innovators, a solutions company. Author of How to Run a College. Former president of Bucknell University.

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