Demographic Changes Pose Challenges for Higher Education

By Nathan Grawe·July 29, 2018
Carleton College

The Issue:

Demographics are working against colleges and universities. For many years, the forces of domestic migration and immigration, as well as fertility differences across racial and ethnic groups, have nudged the U.S. population toward the Hispanic Southwest — a market with relatively weaker attachment to higher education. Adding to these long-term trends, fertility rates in the United States began a deep and persistent drop that coincided with the onset of the Financial Crisis in 2008 and have yet to recover.
If current patterns continue, institutions that cannot find ways to recruit or retain sufficient students may face retrenchment in the next 10 to 15 years.

The Facts:

  • In recent decades, the population of the United States has shifted geographically toward the south and west. Both the reduction in the numbers of Northeastern non-Hispanic whites and the increase in Hispanic Southwesterners represent movements away from higher education’s traditional markets. To gain some perspective, 75 percent of young people in New England attended some college as compared to 64 percent of those in the West South Central (Texas, Oklahoma, Arkansas, and Louisiana), according to the Education Longitudinal Survey (ELS) of 2002. The geographic differences in college matriculation are even starker at more selective institutions: attendance rates at colleges and universities ranked among the top 50 colleges or universities by US News & World Report are 7.7 percent in New England and 0.7 West South Central — a ten-fold difference. The regional contrast in college attendance is partially explained by differences between the regions in factors such as family income, levels of urbanization, racial and ethnic composition, and parental education. However, regional differences persist even after taking these factors into account. (These figures are based on calculations I report in my book: Demographics and the Demand for Higher Education.)
  • A nation-wide reduction in fertility that coincided with the onset of the Financial Crisis further complicates the demographic challenges facing higher education. From 2008 to 2010, the total fertility rate fell 10 percent. Although the drop in fertility began at the time of the Financial Crisis, the trend did not reverse itself as the economy improved. Through 2016, fertility rates continued a downward trend, 15 percent off the 2007 peak according to the last finalized reports by the Centers For Disease Control and Prevention. And, provisional reports for 2017 suggest that we have yet to find the bottom of the present birth dearth.
  • Not all demographic factors point towards decreases in future demand for higher education. The increase in educational attainment experienced over recent decades by the U.S. population means that more and more young people have (and will have) one or more parents with a Bachelor’s degree. The percentage of high school completers who enrolled in college the following fall has risen from 45 percent in 1960, to just under 50 percent in 1980, to almost 70 percent today, according to the Digest of Educational Statistics. This matters for the future demand of higher education because educational attainment of parents is a strong predictor of college attendance. College attendance was less than 50 percent among those for whom the highest parental education attainment was less than high school as compared to almost 90 percent among those with at least one model of a parental Bachelor’s degree, among respondents in the Education Longitudinal Survey. An additional factor that contributes to demand for higher education is the growth of the Asian-American population. Asian Americans have the highest college attendance rates among ethnic and racial groups (see Table 2). The U.S. Asian population grew 72 percent between 2000 and 2015 (from 11.9 million to 20.4 million), the fastest growth rate of any major racial or ethnic group, according to the Pew Research Center. And immigrants from Asia have outnumbered Hispanic immigrants for almost a decade now.
  • But, taken together, U.S. population trends project a more than 10 percent reduction in college enrollments by the end of the 2020s — if past correlations between demographic characteristics and college attendance continue into the future. While population growth statistics are important for projections of demand for higher education, a nuanced analysis requires careful adjustment for the fact that students differ markedly in the probability of attending college by factors such as gender, income, family education, race and ethnicity, among others. In Demographic Change and the Demand for Higher Education, I use data from the ELS to estimate the probability of attendance by demographic sub-groups at a range of college types (from community colleges to elite four-year colleges and universities). I combine those estimates with demographic projections based on Census Bureau American Community Survey (ACS) data to forecast college attendance by state and metropolitan area. The resulting projections show 11 percent fewer first-time college attenders in 2029 than today. The challenges of this adjustment will be made more difficult by the speed of the contraction, which will take place over about three-years.
  • Projected changes in the demand for higher education vary greatly from one region to another. The losses will fall most heavily in the Northeast — an area with a disproportionate share of the nation’s colleges and universities (see map). The deep reductions in prospective college students in the Northeast will be driven mostly by declining fertility and migration rather than by a change in the composition of those living in this region. The Rocky Mountains region, in contrast, is projected to see increases in demand for higher education.
  • Lost enrollments among traditional-age students are expected to be greater at regional institutions (two-year colleges and four-year schools ranked outside the top 100 colleges and universities by U.S. News & World Report). Nationally, such two- and four-year schools are projected to lose 12 percent and 11 percent of traditional-age enrollments, respectively. Because these schools rely heavily on local residents for student pools, losses will be concentrated in the northeastern portion of the country. For example, both New England and the Middle Atlantic are projected to have 17 percent fewer young people with demographic characteristics associated with attending a four-year institution ranked outside US News & World Report top 100 colleges and universities. However, while the Northeast poses particular problems, when combined with information on past college-going behavior, demographic patterns predict fewer such students in every Census division with the exception of the Pacific (Washington, Oregon, California, Alaska, and Hawaii).
  • By contrast, the demand for elite institutions (those ranked among the top 50 colleges and universities) is projected to remain steady through the end of the 2020s. Nationally, the number of students with the demographic markers associated with elite-institution attendance is expected to increase by 7 percent in the early 2020s. These projections are driven in part by the growing share of college-educated parents and the relative increase in the Asian-American population. Despite this national growth, my estimates project that the Northeast will continue to be soft. The model projects losses of elite-institution students in New England and the Middle Atlantic of 3 percent and 4 percent, respectively — if the patterns that link these demographic factors with college attendance continue to hold into the future. While these forecasts are clearly more sanguine than those for less-selective institutions, the birth dearth will still leave a mark at elite schools: in the second half of the 2020s, the number of prospective students with demographic markers associated with attending top-50 colleges and universities is expected to fall by 7 percent, fully reversing the current up-trend.
  • Projections do not imply predictions. People had projected a bust for higher education in the 1990s with generation X being smaller than the baby boomers. But the drop in demand didn't actually happen. The participation of women and non-traditional students rose, counteracting the population drop. In addition, the returns to skill — and to higher education in particular — more or less tripled during that time period, so people wanted to go to college with greater frequency.

What this Means:

As higher education leaders look to the future, significant demographic challenges lie on the horizon. While some institutions may manage to mitigate lost enrollments (and associated fee income) through broader outreach to underserved domestic and international markets, the magnitude of the reduction in fertility is so large that most cannot rely on this strategy alone. Focusing on the challenge of increasing student retention and improving college completion rates offers a potentially fruitful approach. By re-doubling retention efforts some institutions might increase enrollments without recruiting new students. This may require reconsidering a range of practices in and out of the classroom. Institutions that cannot find ways to recruit or retain sufficient students may face retrenchment.


Education Policy
Written by The EconoFact Network. To contact with any questions or comments, please email [email protected].
More from Econofact