Trends in Higher Education

It's January, which means whatever your field, you're inundated with projections for the year to come. Let me add to the pile by taking you through some trends shaping higher education in the years to come. Higher education is a dynamic field where change is a constant. Trends to watch include:

• Demographic and enrollment changes

• Cost trends

• Degree requirements

• A new administration

Let's go through them individually.

Demographic and Enrollment Changes

Starting in 2008, birth rates declined significantly due in part to the Great Recession and have remained lower. Those birth years are approaching college now and the forecast is pretty striking. In 2025, 3.9 million students will graduate high school. Fast forward to 2041 and the number of graduates is projected to be just 3.4 million-- a drop of more than 10%.

In addition, college going has been on the decline for several years. In 2016, 70% of high school seniors enrolled in a 2- or 4-year college. In 2021, the percentage had declined to just 62%. And that was before last year's disastrous FAFSA rollout.

This combination will likely result in substantially lower numbers of students applying to and enrolling in college, with a 10% drop projected in the next few years. What does this mean for students? It does not mean it will be easier to get into Harvard; if Harvard's applicant pool were 10% smaller, they would still have a single-digit acceptance rate.

It does mean that smaller, tuition-funded colleges will face increased financial pressures. Closures are likely to accelerate among this type of school. That's a risky proposition for a student because transferring because your college shut down can mean not only losing scholarships, but also losing credit for courses already taken-- increasing the cost and the time to get a degree.

It is likely to also mean that colleges outside the most selective will become more aggressive about discounting tuition in order to fill classes, so students willing to shop around are likely to find some bargains.

Cost Trends

You've probably heard that by now, multiple colleges cost over $100,000 per year. Here's some bad news: there is no cost pressure on the most selective colleges. The Ivy Leagues, for example, received over 385,000 applications last year, the vast majority from students whose families were willing to pay full price. Don't expect that willingness to be overlooked. And with the average tuition inflation rate running at 4% annually, if anything expect that it won't be long before it costs $500,000 to get a four-year degree at many colleges.

The good news is, tuition discounting is at an all-time high, too. Last year, the average tuition discount rate was 56.1%, meaning that for every $1,000 of list price tuition, only $439 actually got paid. Discounting in the form of merit scholarships is pretty aggressive once you get outside the most selective colleges. At the same time, these highly selective colleges are becoming increasingly generous with need-based financial aid such that families earning $200,000 or less will attend man colleges tuition-free; those with lower incomes will qualify for free room and board as well at many such schools.

In addition, increasing numbers of free or dramatically cheaper options are becoming available, from free community college to dual enrollment programs to online degree programs. More good news: online programs are being subjected to additional scrutiny to ensure that students completing degrees online are getting good educations, too.

What does this mean for you? It means that you'll have good college choices, whatever your budget, as long as you're willing to really look at your options.

Degree Requirements

California recently announced that degree and other educational requirements were being removed for numerous public sector jobs, joining about 20 other states that either have already or are in the process of removing degree requirements. Similarly, many professional associations such as the CFP Board have weighed allowing experience in lieu of a degree. These changes are more likely to benefit mid-career professionals who have earned qualifications through experience than recent high school graduates, but they do represent future pathways for young people unable to complete four-year degrees.

At the same time, many other career paths, especially in healthcare and education, are seeing increasing degree requirements. Our national nursing shortage is no doubt exacerbated by states requiring BSN degrees, even for nurses with decades of experience. Many states require physical therapists to earn a doctorate. Masters degrees and state specific licensing requirements for teachers limit mobility in that profession.

Incoming Administration

Given the incoming head of the Department of Education's total lack of education-related experience, it's difficult to predict any of her priorities. However, members of the new administration have brought up a few education initiatives or priorities:

• Eliminating the Department of Education

• Expanding the endowment tax

• Workforce development initiatives

• Ending programs for undocumented students

Let's unpack those.

The Department of Education has a pretty broad mandate and runs numerous programs. Federal student aid-- the FAFSA, federal student loans, Pell and other grants, and work-study-- is just one of the Department's mandates. It's also responsible for K-12 programs such as Title I, special education, and school improvement grants. In addition, the GED, high school career and technical programs, adult education and vocational and rehabilitation programs are under the purview of the Department of Education. It seems unlikely that we could simply shut this all down.

It's more likely that we'd see some changes to existing programs, especially Pell grants and student loans. Eliminating Pell grants has been discussed, as has expanding them to non-degree programs such as apprenticeships. Student loan forgiveness programs are likely to be reduced, and it's possible that the federal government could get out of the student loan arena and reprivatize lending a la the FFEL loan program. Note that repayment and forgiveness options are included in loan promissory notes, so existing borrowers will continue to be eligible for repayment plans. Going forward, one might expect changes to Public Service Loan Forgiveness and potential elimination of non-PSLF loan forgiveness.

The Tax Cuts and Jobs Act of 2017 introduced a tax of 1.4% on endowment income at universities with at least 500 students and $500,000 per student in endowment funds. On the campaign trail, the president-elect spoke of increasing this tax; in fact, in 2023 the vice president-elect introduced a bill to levy a 35% tax on university endowments. Typically, more than half of an endowment goes to financial aid, research and teaching, so it would be difficult to increase the endowment tax significantly without impacting those areas.

One area the new administration has put some emphasis is workforce development initiatives, potentially prioritizing technical training over higher education. As above, that might include expanding Pell grant eligibility to students pursuing apprenticeships or other training.

Whatever policies are ultimately pursued or implemented, reducing federal involvement in or oversight of education and education funding means it's even more important for families to make good financial decisions on college. That means minimizing debt, especially for students who intend to pursue graduate or professional degrees. It might mean considering alternate pathways such as starting a degree in community college or via a dual enrollment program.