Here’s What the College Enrollment Drop Means for the Future of Higher Education

The pursuit of higher education was, for decades, the natural extension for ambitious students who wanted to make a mark in the world. But over the last decade, student thinking has shifted—and enrollment in colleges and universities has been on the decline.

During the pandemic, those institutions saw steep drops. And while things have rebounded to nearly pre-pandemic rates, the number of people headed to college is still shrinking. The National Student Clearinghouse reports that the number of enrolling undergraduates in the fall of 2022 was down 1.1%. And when added to last year’s dip, the total two-year decline since 2020 came in at 4.2% (graduate school enrollment was down 1%). 

The reasons vary. Some graduates feel they significantly overpaid for their education. Others say they’ve lost income potential in that four-year course of study. But student loan costs are the most common refrain. A 2021 survey of students who decided against attending college or university found that half would have attended school if they had received adequate financial aid.

“The financial burden of college is a significant barrier to entry, and the pandemic has further increased many college- or CTE-bound students’ need for financial assistance,” said James F. Dicke II, president of the Horatio Alger Association, which conducted the survey. “The large majority of this year’s graduating high school class see the value in continuing their education, and would pursue a postsecondary degree, if they had the means.”

The enrollment crisis might not be as severe as it once was, but the declining number of students isn’t likely to end soon. Many colleges hoped students who took a year off in 2020 and 2021 would return as the pandemic ebbed and opportunities to return to in-person learning expanded. Problem is: They didn’t.

Jobs were plentiful after a brief shock when COVID-19 hit. And many families experienced financial hardships that made college unaffordable. Remote learning, meanwhile, made college less appealing to many students, who craved the traditional college experience.

It’s the long-term effects that worry most onlookers. Delaying college enrollment can have a notable negative impact on a person’s earnings trajectories. And, given the current shortages in critical fields like healthcare, the declining enrollment numbers indicate those issues aren’t likely to be resolved anytime soon.

Then there’s the impact on the colleges themselves. Fewer students means less income—and while some prestigious schools have beneficiaries and endowments to help them survive a financial crisis, others do not.

It’s a one-two punch that hits both schools and students.

“Most colleges depend on tuition associated with their students to float the boat," Chris Gabrieli, chairman of the Massachusetts Board of Higher Education and a lecture at the Harvard Graduate School of Education, told the Harvard EdCast. "They have high fixed costs, and so they can't easily absorb in a downturn. For our society though, it's a greater challenge. I mean, we know that while there are many who challenge the hegemony of a college degree or a master's degree as what's necessary remains the case, that is the primary way to get into the middle class in this country and to sort of enjoy the full respect of the fellow citizenry.”

The most selective schools will be the least affected, predicts Nathan Grawe, an economist at Carleton College in Minnesota and the creator of the Higher Education Demand Index. The prestige of a degree from a Harvard or Princeton will let them maintain high prices and have more than sufficient demand. Smaller regional schools, though, could feel the pain.

Grawe predicts that demand for those colleges will fall 7.5% or more across New England, the mid-Atlantic and Southern states (excluding Florida and Texas). And community colleges will see widespread declines.

The sad irony in all of this? While fewer students are attending college, the majority acknowledge that it’s the best path to a good job. A 2021 survey by StrataTech found that 59% of high school students believe it’s necessary to have a bachelor’s degree to get a good job.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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