I first wrote articles in 2017 and 2021 about the decline in traditional higher education. You can see them here and here. Back in 2017, higher education was six years into an enrollment decline with ballooning student debt, an increasingly unstable business model, and looming disconnects between what colleges and universities provided students vs. what that actually needed. By 2021, as the pandemic was nearly a year old, the landscape began to get more complicated with continuing enrollment declines, worsening demographic trends, increasingly negative public opinions about higher education, crippling student debt, further diminished ROI for students, and an increasing number of post-secondary alternatives to college. Even by 2019, before the COVID crisis, about a third of all colleges and universities were already operating in the red with additional enrollment and revenue declines still to come.

What’s happened since then?

Well, the underlying fundamentals have gotten quite a bit worse and it is arguable that a substantial swath of the higher ed industry may be vulnerable to collapse. No, that is not hyperbole. It simply reflects multiple underlying realities related to consumer behavior, market shifts, increasing student attrition, unsustainable business models, and substantial moves away from college degrees as credentials for employment. A good private sector analogy would be store front retail. For perspective, over 1,200 institutions, mostly for-profit, closed between 2010 and 2019. Between 2016 and 2019, 86 non-profit colleges closed or merged and another 53 met the same fate in the 2019-2020 school year alone. The rate of closures and mergers is accelerating and shifting from the for-profit sector to non-profit schools. This trend will increase substantially over the next several years as institutions have exhausted pandemic funding and other short term cash management initiatives.

As of 2022, there are now 4.1 million fewer students attending college than in 2011 and 1.4 million fewer just since 2019, which is a decline of 10% since the pandemic began. Enrollment fell by an additional 662,000 students just since spring of 2021. In terms of consumer behavior, we’ve seen a dramatic decline in percentage of high school grads intending to attend 4-yr college from 71% in 2019 to 48% in 2022 and many potential students have simply abandoned traditional college programs altogether in favor of high value, short-term, industry focused options.

Going forward, demographics alone will likely decrease college enrollments by another 15% by 2029. And those students who are enrolled are far more fragile, both financially and in terms of general wellness, than even ten years ago. For example, three million students leave college each year because of a time-sensitive financial crisis of $500 or less. While many eventually return, many do not, and there are currently 39,000,000 dropouts in the U.S., which is up nearly 9% since 2018! Additionally, in the first six months of 2022, 41% of community college students and 32% of bachelor’s degree students reported considering leaving school due to mental health issues. As of late 2021, 70% of college students say that affordability has affected their enrollment plans. And although the perception is that most families have weathered the pandemic financially intact, 36% of parents reported having taken money from their children’s college funds to compensate for pandemic related financial challenges. In fact, the median family income in the U.S., adjusted for inflation, is more than 10% lower today than in 2007! When we combine financial/economic, mental health, and family issues, the situation is potentially bleak, not just now, but for years into the future.

On the contrary, non-credit / non-degree programs are growing. For example, enrollment in coding boot camps grew by 70% in 2020 and as of May, 2022, over half a million students were enrolled in short-term certificate courses through Amazon Web Services with similar numbers from Grow with Google, Microsoft Education Center, and other very large purveyors of non-college, post-secondary education. This doesn’t even include the millions of people taking industry delivered entry-level and upskill training in the workplace. AWS alone has committed to provide upskilling courses to 29 million people who don’t work for Amazon – no that is not a typo – by 2025 for free. Moreover, a survey conducted during the pandemic found that 63% of adults who were out of school said that if they did pursue an educational program, they would prefer non-degree skills training or certificates rather than a degree program at any level, so it’s clear that given a choice, much of the student market is rapidly moving away from college degrees as a preferred option within the broader post-secondary ecosystem.

And to be clear, the exodus away from traditional higher education is not just about cost. It is about perceived value. A great example is Calbright College, a publicly funded institution in California, that literally can not give away free certificate programs paid for by the state. After somewhere in the neighborhood of $100,000,000 of public funds spent on startup and operations, and close to three years of operation, the institution enrolls about a thousand students and still hasn’t conferred even a thousand certificates.

The simple fact is that the market changes and disruptions impacting much of higher education are so profound that in the absence of foundational changes in both funding models and consumer behavior, neither of which are likely, there simply will not be enough demand over the next decade to support all of the thousands of colleges and universities operating today. About a third of the wealthiest and most exclusive colleges and universities are likely to continue operating with viable financial models for the foreseeable future—although with less exclusivity at the bottom of that elite group. The other two thirds will exist on a spectrum of risk, with many simply unable to survive in their current state, or at all, and with others operating as “zombie” institutions, technically alive, but shells of their former selves. Keep in mind that nearly one third of all colleges were spending more than they were taking in before the pandemic and many have exhausted most of the short-term tricks for preserving cash (layoffs, borrowing, elimination of sports teams and academic majors, delaying maintenance and accounts payable, etc.). And of more recent concern, the federal pandemic relief via the CARES act, roughly $50 billion dollars for higher education, has been disbursed and mostly spent. This substantial cash influx papered over cash crises and even insolvency at many institutions, but no more is coming and those institutions that were at greatest risk will soon be unable to operate.

As noted earlier in this article, the notion of at least partial collapse of the higher education system is not alarmist hyperbole. There simply are not enough students with enough money to support all of the institutions that exist now and that will get worse, not better, over time. For institutions of higher education (IHEs) existing somewhere on the risk spectrum, those with the most compelling need to reinvent themselves are those in moderate peril. The “code blue” schools will not have the resources or time to change and the most elite won’t need to. In short, a substantial number of IHEs whose survival horizon is several years out must aggressively begin the process of reinvention now, before it’s too late.

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Note: The data in this article come from a variety of primarily governmental and some private organizational sources, all of which have been vetted by the Transformation Collaborative™.