A perfect storm is forming on the distant--or maybe not so distant--horizon with a nexus among the following factors affecting colleges and universities:
- A rapidly changing demography,
- Intensifying recruitment pressures,
- A burgeoning population of students poorly prepared for higher education,
- A worsening imbalance between male and female enrollments,
- Expanding threats for a variety of government efforts toward price controls,
- Swelling student financial need, and
- Relentless pressure to provide more and more extensive student service programming.
Between now and 2015, we'll see a slow decline in the traditional college-aged student market. The student market in the northeast and mid-west will decline at least until 2022 while the west will experience a modest increase and the south will experience a significant increase. A smaller market in the northeast and mid-west will create more competition for students in these regions. The likely result will be lower prices, and pressure on institutional costs in the northeast and mid-west. But these institutions will likely make forays for students into the south and west, where markets are growing, creating a more competitive environment for institutions in those regions. The result will be lower prices and cost pressures in these regions as well.
White high school graduates will decline by 13% nationally by 2022 and African American high school graduates will grow slightly, then they will flatten to no growth status around 2020. Growth in the Asian American and Hispanic American markets, primarily the Hispanic, will effectively replace the loss of white students. Hispanic high school graduates have been outpacing all other ethnic groups since 2004, and the cumulative growth for this market will be 90% by 2022. Growth in the smaller Asian American market begins to outpace that of white and African American high school graduates in 2009 and increases by a total of 63% by 2022.
Increases in minority, particularly Hispanic, students will exacerbate quality, programming and cost issues already extant at colleges and universities because a larger proportion of them will be first generation students, having little family experience with college going skills, and these students will have less financial capacity than the average student of today. Thus in the future, a larger proportion of our students than today will lack sufficient preparation for higher education and have higher financial aid needs. So, on the one hand, increasing competition resulting from regional demographic trends will be placing pressures on institutions to reduce price and cost, while on the other hand, increased demand from a higher proportion of minority students for student services and financial aid will place more pressure on institutions to increase expenses. A storm is gathering.
Today, young women are taking more leadership positions in high schools and colleges than men, and women account for nearly 60% of undergraduate enrollment and a majority of enrollment in most graduate programs. Maybe it's not a big problem now, but this problem with men's educational attainment will be exacerbated by increasing minority enrollment. There are lots of reasons, but this frightening statistic explains a lot: In US urban populations, 30% of white boys have a fatherless family, 50% of Hispanic boys live in such a family and 70% of African American boys do. Without male role models, how will these boys recognize the importance of education, never mind gain effective preparation for college? They won't! If colleges and universities wish to maintain their enrollments and maintain any kind of gender balance in their enrollments, they are going to have to spend significant resources on outreach to male students in early grades and remedial education when they arrive as freshmen. There's an unusual stillness in the air, an ominous pressure change.
And there's more. Published private sector tuition and fees increased about 32% over the last ten years, 52% in the public sector. In the minds of the public and most of their elected officials, private colleges get most of the blame for this because their book price is so much higher and the public doesn't understand the pricing structure of higher education well enough to look to net price after institutional aid. They don't see that the bulk of these tuition increases are in the public sector and are the result of reductions in direct state appropriations to those public institutions. They don't see that the net affect of higher tuition in the public sector is good public policy unintentionally made: mediating the price differential between public and private colleges, causing them to compete more equally on quality, and reducing the subsidy to low need students who receive a free ride in the public sector. The thunder from Washington persists however, and is noticeable to all: Congressional hearings aghast at the cost of higher education, the Spellings commission report demanding a lowering of cost and price, reauthorization legislation suggesting price controls or at the very least procedures to humiliate institutions who raise their prices beyond a certain percent, no matter what the reason. All this adds additional pressure to lower cost and price.
The biggest cost drivers in private higher education are student service programming and institutional financial aid. The combined affect of these two expense areas has caused a reduction in the overall proportion of expense that instruction accounts for from about 40% to about 20% over the last couple of decades. The increases in student service programming are a result of direct competition between institutions with special programs to attract students, a decline in preparation for college attendance requiring more remedial programming and greater demand from the general student population for institutionally provided medical and psychological services. The increase in institutional financial aid is also a result of competition between institutions on price, but it has a nasty affect on all but the 100 most selective colleges and universities if they have any desire to maintain quality. These institutions must look at the need/ability matrix when they determine financial aid. The unfortunate fact is that high student ability (as indicated by measures like SAT/ACT scores and high school GPA) is most likely associated with low financial need, and high financial need is most likely associated with low ability. The most selective colleges can fund student need regardless of their ability and still get students with the highest ability at all need levels, because just about everyone who applies is of high ability. This forces less selective colleges (almost all the rest) to provide merit aid in addition to need based aid to maintain a quality entering class. That increases pressure to provide more discounts, and yes, places even more a burden on costs.
Another factor that colleges and universities will need to deal with in the next decade or so will be the coming revolution in instructional delivery systems. The nature of the educational process at most colleges is likely to change dramatically. We'll be moving from instruction processes to learning processes, from teaching students to coaching students, from in-sourced and scheduled instruction to out-sourced and unscheduled instruction, from individual learning styles to collaborative learning styles, from physical instructional delivery to virtual/technological instructional delivery, and from in-class/in-lab instruction to the use of courseware, internet based instruction and gaming software already heavily used by the US military. Those who move in this direction most quickly and most competently may find shelter from the coming storms.
Finally, as we've warned before, the sub-prime credit crunch will hit higher education this fall. Students with highest need tend to have less family financial equity and thus tend to use private alternative loans, which are usually sub-prime, for their education. These loans, once widely available, are less so now as increasing numbers of lenders leave the marketplace. Less selective colleges (most colleges) have a higher number of more needy students and students with more sub-prime loans. These institutions will need to find new loans for these students or suffer enrollment declines. Enrollment declines mean less income for these tuition dependent institutions, and even more pressures to reduce costs--or close.
If your college has not yet done so, it should:
- Determine how many of its students will be affected by the sub-prime credit crunch
- Find alternative lending sources for those students
- Walk those students through the application process as it will be confusing for them, because they are more likely to be first generation college students and won't have much parental support
So in the not so distant future we'll see changing demographics, intensifying recruitment pressures, a burgeoning population of students poorly prepared for higher education, a worsening imbalance between male and female enrollments, expanding threats from a variety of government efforts toward price controls, swelling student financial need, and relentless pressure to provide more and more extensive student service programming. Simultaneous pressures will be unleashed on colleges and universities to both increase expenses and reduce price, the perfect storm.
The best course to a safe harbor will be a challenging yet essential one. It will likely be found in the re-visioning of the way we deliver student services and instruction. The eventual melding of these two processes, which are collaborative at the best institutions and nearly distinct enterprises at the rest, will result in a radical change in the way we think about and deliver the educational process. On the academic side, maybe our faculty will move from their traditional roles as instructors to new roles as advisors and learning coaches who guide students through a curriculum delivered mostly by out-sourcing via the internet, computer course-ware and gaming software. Maybe some faculty will focus exclusively on the design of internet based curricula or curricula software. On the student affairs side, maybe our faculty will take on many of the roles normally played by student services staff like remedial education, student counseling and residential life, for instance.
Imagine the enormous task of encouraging, supporting, leading and cajoling our faculties to take ownership of this extraordinary change. Imagine if institutions wait until the crisis is upon them and boards and presidents and provosts implement these changes without faculty ownership. That's change management hell! Forward thinking institutions will begin work with their faculty now to redesign their learning and co-curricular services into one seamless process. This will start most likely with task forces of interested and future-oriented faculty charged with integrating student and instructional services and thinking about the use of new instructional paradigms that rely on technology; to improve quality and reduce costs. Well charged and well supported faculty task forces will break through on some big issues and recruit more faculty to a new way of thinking about the academy. We believe a few institutions will chart this course to a safe harbor for all of higher education.
What do you think?