November 29, 2023

Ricardo Azziz held a number of executive positions in higher education and led the merger that resulted in Georgia Regents University, now Augusta University. He is a director at Strategic Partnerships in Higher Education Consulting Group.

He writes Merger Watch’s regular opinion series on corporate restructuring in higher education.

Ricardo Azziz's head shot

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Good News? Enrollment in bachelor’s studies this fall down only 0.6%, the smallest amount that has fallen since the start of the pandemic. Bad news? College enrollment continues to decline in the US.

No wonder recently S&P Global Ratings outlook for higher ed is bearish on the industry, citing continued upward cost pressures and downward pressures on registrations and margins. This is a less-than-certain outlook from an agency that surveys only the nation’s 450 or so financially strongest colleges.

One fact that often gets lost in the hand-wringing that accompanies minutes and financial reports? Size matters.

Researching enrollment trends from fall 2012 to fall 2020, for institutions receiving federal financial aid, higher education lost approximately 1.7 million students, or 8.4% of total enrollment. Colleges with fewer than 1,000 students lost 35% of their students. Schools with enrollments between 1,000 and 5,000, between 5,000 and 19,999 and between 20,000 and 29,999 lost 10%, 12% and 23% of their students, respectively.

Only the largest universities increased their share of students

% Change in Total Enrollment by College Size, Fall 2012–2020

Alternatively, schools with more than 30,000 students actually increased enrollment by 19%, adding approximately 760,000 students combined. Consistent with this analysis a recent report from the Urban Institute noted that between 2000 and 2018, the 50 US public flagships, taken as a whole, increased their total enrollment by 24%.

Several facts emerge from this analysis. First, the relationship between student enrollment change and institution size (total enrollment) is not linear. A very small college with fewer than 1,000 students is a particularly endangered species. Meanwhile, the average larger school of 20,000 to 30,000 students has also suffered significant enrollment declines and is likely at significant risk of further losses.

Second, the largest institutions with enrollments exceeding 30,000 students performed well despite the hostile environment. Third, in the past decade, about 2.5 million students are no longer available for smaller institutions, either because fewer students are pursuing higher education or because they have been absorbed by the growing 100 or so schools. This is a decline in students at smaller universities, which corresponds to the total enrollment of 60% of all schools with fewer than 5,000 students.

Why is that so?

First, it’s about brand recognition. The largest schools and a few smaller highly selective private colleges gain recognition more easily. This recognition supports the growing emphasis on assessment, the power of athletics, and the ability to leverage innovative—and newsworthy—scholarship and discovery. This brand and national recognition drives student applications and enrollments beyond the institution’s local region. For example, much of the growth of public flagship universities the past two decades have seen an increase in their national reach, with the share of out-of-state students increasing from about 25% in 2001 to 37% in 2018. In fact, the flagships that have grown the most over this period have seen the largest decline in their share of in-state students.

Greater recognition is often driven by increased selectivity – because we all want to belong to those clubs that are hard to get into. Between Fall 2021 and Fall 2022, actually enrollment declines were concentrated at the least selective colleges, with only highly selective schools seeing gains in undergraduate enrollment. In the data I examined, schools with 20,000 to 30,000 students are often regional institutions with less selective enrollment.

Second, it is about assets and resources. The largest schools have a greater ability to spread administrative and overhead costs over a broad student base. This frees up resources that can be directed toward developing robust online programs—further leveraging their brand and expanding their reach—right in the backyard of smaller, more regional schools.

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