The (Continual) Transformation of Higher Ed: Winding Down

When the supply of colleges exceeds the demand for college education.

One curious aspect of academia as a business is that many people in academia don’t think of it as a business. Some of this stems from a sensible rejection of the profit motive in organizing our affairs – we insist on the kinds of cross-subsidies that let someone study the Ming dynasty or the Riemann hypothesis without calculating ROI, and rightly so. Even non-profits like ours, however, are subject to brute economic facts: first, the reason our income comes in is that students, their parents, or the state pay for our services, and, second, every college and university has to spend less than it earns more years than not, or it dies. 

The practical effect of not believing college is a business is that it becomes harder to think clearly about the material conditions of higher education overall. Right now those conditions are decline and constraint; if I had to describe the recent past of American higher ed in one sentence, it would be “Seventy-five years of growth, thirty-five years of stasis, a decade and counting of contraction.”

This is an unsatisfying gloss, as it ignores the actual events – the GI Bill, co-education, the rise of business degrees, the explosion of community colleges, interdisciplinary work, diversity work, competency-based education, all the stuff that actually happened. On the other hand, Marx was onto something with that base and superstructure thing. However college is structured in any given society depends on its productive base, including especially whether there is institutional growth, stasis, or contraction.

You can see these dynamics clearly in Virginia Sapiro’s fascinating paper, When the End Comes to Higher Education Institutions, 1890-2019. Sapiro provides data for openings and closings of Bachelor’s-granting institutions in half decade increments. I’ve used and reformatted the data below to show total and net openings (in light and dark blue) and total and net closings (light and dark orange) from 1900 to present. The color of the the middle segment in a given 5-year period tells you if more colleges opened (dark blue) or closed (dark orange).

You could title this chart 1975: Growth stops. 2010: Shrinking starts.

For most of the 20th century, foundings outnumbered shutdowns, and not by a little. In every five-year period prior to 1975, the system netted at least five new colleges a year. Since 1975, no period has seen that much growth; more colleges were added to the system during five years of the Great Depression than in all years after 1975 combined. In this century, there has been growth in only one anemic period, but three periods of contraction. The most severe period of loss was the one that just ended. Second-most was the one before that.

You can get a slightly different view of the same data by adding it together, to show cumulative increase or decrease in colleges in the U.S. (Note that the Y axis is four-year colleges added since 1900, not total number of schools.)

Through boom and bust and war and peace, the number of colleges rose. Growing this consistently for this long was culturally devastating to the academy. By 1975, there were no faculty or administrators who had ever experienced anything other than constant institutional growth. No one had even studied with anyone who had experienced anything other than growth. 

Any industry can have a great few years, but when the good times go on for generations, people stop thinking of themselves as lucky, and start thinking the boom is just the way things are, or, even worse, that their good work causes the good times. Academics’ belief that we were the architects of our own good fortune made us personally and institutionally unready for the good times to end. Then, suddenly, they did. (Though for decades after, faculty and students continued to get spectacularly bad advice about the return of growth that never came.)

1975 was the year the growth stopped. And in 2008, the dynamics shifted again, with the financial crisis kicking off the worst decade of net closures on record. When you are used to growth, stasis feels like a crisis, and when you are used to stasis shrinking feels like a crisis; in the same way it took us decades to adapt to the end of the golden age, we will probably take too long to recognize that the silver age of stability, post-1975, collapsed about the same time Lehman Brothers did. 

Many selective and popular colleges and universities are fine, of course, and within that group, a few are rich. The press’s obsessive Lifestyles of the Rich And Famous Colleges coverage obscures the the actual problems of the system, which are concentrated in lesser-known and shrinking schools. You can see this in an Eduventures Research study of the relationship between enrollment and expenditure per student in over 500 public four-year institutions from 2012 to 2018.

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. Published weekly, more or less. Feel free to forward. Subscribe here.