Unsurprisingly, in the aggregate of schools studied here, rising enrollment allowed for lowered expenditures per student. Colleges and universities have significant economies of scale, where adding a few more students, who mostly use resources that are already paid for, improves the school’s overall finances. More surprising is that even modest declines in average enrollment led to far more substantial increases in spending per student. This is partly because colleges have inelastic costs – it costs nearly the same amount to educate 950 students as 1000, with 5% less in tuition – but also because colleges under pressure spend more per student on marketing and services, in an attempt to stem their decline.
There are no forces that look like they will reverse financial pressures in the next five years. Indeed, the imbalance in expenditures between growing versus shrinking schools may give further advantage to colleges with growing online programs, like Central Florida, U. Maryland, and Arizona State. And 2025 is 17 years after the birth dearth
, kicked off by the Great Recession, which will further reduce the number of high school graduates. Many colleges, especially small colleges that recruit locally, are in a game of musical chairs. Some will inevitably close, but competition to not be one of those colleges will waste resources and leave the students worse off than if they were to transfer to stronger schools now.
This creates an incentive to lie to students. When Mt. Ida, in Newton, MA, announced in April of 2018 that they would shut their doors in mere weeks, the chair of their board said they’d never told students about the school’s troubles till then, so as not to set off a downward spiral
. The students felt the surprise disintegration was worse, because with some warning, they would not have been stranded in a suddenly defunct institution.
Appallingly, the subsequent court case
described how completely Mt. Ida kept students in the dark, but affirmed that colleges have no fiduciary duty to their students. And the declining enrollments that pressured Mt. Ida remain in effect for many other schools.
We know how this ends: Supply of colleges will shrink to meet lowered demand for college education. Though we academics can sometimes behave as if the world owes us a living, the brute facts of revenue and cost remain, and no one is coming to save us, at least not all of us. Even a return to modest growth in student headcount wouldn’t be enough to stabilize schools in the depopulating regions of the Northeast and Midwest
The likeliest process for supply meeting demand, the one currently underway, is that a dozen colleges shutter every year while few open, until we reach a new equilibrium state. On the present trajectory, that will take a couple of decades, strand tens of thousands of students mid-degree, and waste many millions of dollars. It will also stifle innovation for decades – the majority of new models in higher education come from recently founded schools. (Desperation is the mother of invention
, and in education as everywhere, a startup is a kind of crisis you create on purpose.) We will get very few new experiments in the design and operation of colleges until the backlog is cleared.
A second possibility is that we find some orderly way to shut weak schools down, providing enough money and time to arrange for a planned teach-out for existing students. As at Mt. Ida, presidents, administrators, and trustees have an incentive not to admit defeat until it is much too late to wind down in a careful fashion, but having something like a base closing commission
would be better for everyone than simply accepting decades of waste and risk while waiting to see who fails.
There are a few efforts to solve this tragedy of the commons, as with the Massachusetts law requiring public disclosure of financial risk
, or various attempts to educate students and their parents about college quality
. These are limited in reach, however, and as always, colleges are resistant to informing students about financial risks to their school.
A third possibility is that more colleges facing these struggles could combine, with groups of colleges each shrinking a bit, together. This is happening with Pennsylvania, which is combining state schools from 14 down to 10
, but the COVID pivot to online education creates the possibility for more networked forms of consortia.
Small groups of schools could share course catalogs at a distance, with each school offering the in-person classes to local students, and online classes to both the locals and every other student in the network. Several schools in the Big 10 did something similar
, cross-listing their online course catalogs during COVID. If participation in an athletic conference is enough to create the trust needed to collaborate, other similarities in size, goals, outlook, student populations, sectarian commitments and so on could be the basis of such networks as well.
This model would of course mean reducing faculty and staff somewhat at each of the participating schools (the source of the savings that prevents any of them from collapsing), but with advance planning, that could be accomplished more through attrition than layoffs, and would leave each school stronger, rather than just waiting to see which one collapses.
But for all the obvious appeal of orderly shutdowns or careful consortium design, by far the likeliest scenario is simply stressing a dozen or so colleges to the point of collapse every year, Mt. Idas as far as the eye can see. Academics often don’t think of closures as inevitable, because we don’t conceive of college as being subjected to ordinary economic logic. (This doesn’t stop them from being subjected to ordinary economic logic.) Students don’t think of closures as inevitable because we don’t tell them. If we come to understand that, at base, we are an industry with more colleges than demand can support, we can manage that decline faster and better than if we deny it is happening, while it is happening.
Continual Transformation of Higher Education
is a newsletter by Clay Shirky
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