Higher Education Bubble Deflates
Enrollment has decreased 12% in the last six years consecutively and signals the decline of higher education as growth slows to a crawl.
Why is enrollment decreasing? It is not one factor — but several, which I partly covered in the 7 Trends Disrupting College. Here are the most notable:
- Tuition increases have outpaced housing, wages and consumer goods, putting pressure on buyers (The Economist)
- Market size decreases as the number of high school graduates is shrinking due to declining birth rates (IES, NCES)
- Funding declines as states cut aid to public colleges (Center on Budget and Policy Priorities)
- Certification, bootcamps, and virtual alternatives increase offering more alternatives for learners
- Non-traditional learners increase and demand more flexible products including modular, part-time, ‘on-demand’, and distance learning options — different from higher education’s traditional core offering (Department of Education, Accenture)
- Low unemployment causes companies to increase incentives for attracting and retaining talent — making leaving the workforce to return to school less likely (Bureau of Labor and Statistics)
The combination of those factors is leading to less learners deciding that higher education is worth the investment.
Source: Department of Education
Colleges and universities in response have offered new flexible programs, certificates, and are experimenting with new models. Most recently, colleges have slowed down the rate at which they increase tuition to the lowest level in years (notice I said, tuition is not falling, the rate of tuition increases have declined).
Source: Bureau of Labor and Statistics
Learners have been absorbing the burden of increased costs — seeing the traditional two and four year program and college degree as the pathway to a good job and part of the American dream — but that is being challenged. Personal sacrifices are mounting. The Federal Reserve Bank of New York issued a report showing debtors are delaying buying a home. And a survey by bankrate.com showed millennials aren’t buying cars, saving for retirement, and delaying marriage due to the burden of student debt (NBC).
While the $500 billion dollar industry is not going anywhere over night — the writing is on the wall. With the rise of modular, on-demand, free, and inexpensive offerings (e.g. Khan Academy, Coursera, edX, Udacity, Udemy, Skillshare, Lynda, LinkedIn Learning, General Assembly, MissionU) it is only a matter of time before a majority of colleges embrace the ‘innovate or die’ mantra. People want what they always want — cheaper, faster, and more relevant — and higher education, while painfully sluggish to adapt is not immune. Several have taken the lead and profited greatly. Georgia Tech and Udacity have experimented by creating a $7000 degree program and Southern New Hampshire University has created a highly successful competency based program.
More flexible and affordable options are needed more than ever. Technology and the economy are evolving more quickly, causing companies to demand employees with new skills at an increasing rate. The market for the traditional two and four year ‘butt-in-seat’ programs will deflate — but those educational providers that embrace the “cheaper, faster, and more relevant to jobs” mindset will lead the way to enable a fluid workforce and a sustainable learning system for all.
Co-Founder & CEO, Caila
