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Abigail Lindner Regent University |
Through the 20th century, a university education was lauded as the pathway for success in adulthood for American students. However, in the past decade this view has shifted. College enrollment peaked in 2011, and has since been in decline most years for all but fifteen states, and even there the increases weren't more than 2% in 2019; in contrast, the states with declines experienced drops of 4% or more (Nietzel, 2019).
In the United States, a shrinking pool of college-bound high school graduates - a trend related to a stronger economy, lower birth rates in the last generation, and lower state contribution to education - endangers the vitality of the higher education landscape (Nadworny, 2019). In their recent publication, Pavlov & Katsamakas (2020) of Worcester Polytechnic Institute in Massachusetts and Fordham University in New York investigated the effects of college-level responses to these declining enrollments.
Drawing on system theory, Pavlov & Katsamakas (2020) framed the collegiate ecosystem as a system dynamics computational model involving the four interconnected sectors of Students, Faculty, Facilities, and Financials. The causal structure of the model is drawn below, where the elements in squares are the stocks and the other elements are the influencing variables.
The directed arrows of this model indicate the positive or negative impact of a cause X on an effect Y. For example, an increase in Students would increase Facilities shortage - that is, there would be an even greater shortage - while an increase in Facilities would decrease Facilities shortage.
Simulated scenario analysis measures the impact, based on the above causality understanding, on the student body, faculty load, net revenue, endowment, and debt of three strategies:
- The “do nothing” strategy, the base case, wherein the college “does not actively mitigate the declining applications”
- The cost strategy, wherein the college reduces faculty to offset revenue losses from lower enrollment
- The revenue strategy, wherein the college develops campus facilities, such as dorms, to attract students and thus increase revenue
Using the enrollment drop for Massachusetts of 15%, Pavlov & Katsamakas (2020) suppose receipt of 6,500 applications to a generic college in 2010 and a decline starting in 2015 and running to 2025, at which point the college expects only 5,525 applications per year.
As expected, the “do nothing” strategy has adverse effects on all but faculty load. As applications decline, student enrollment declines, so the college has less revenue from tuition, board, and other mandatory university costs that provide the majority of funding. The causal structure indicates this: Student enrollment is proportional to revenue (increase desired) and to faculty load (increase not desired). Therefore, declining enrollment harms revenue but helps faculty load. Moreover, expenditures per student increase as the university must spread fixed expenses, such as facilities and faculty, over fewer students.
Figure 1: Causal structure of the college model (Adapted from Pavlov & Katsamakas, 2020)
For a few years, the simulation predicts that the revenue, lesser though it is, will be sufficient to cover expenses. Come 2018, the university must draw from their endowment to stay out of the red. Endowments, often employed during emergencies, are fit for the task of bridging the revenue-expense gap, but only for so long. Within five years, the university will fall back on loans, which add to operating expenses through interest payments. This, of course, won’t support the university long-term since no new revenue is coming to pay off the new debt.
Without increasing tuition, the “do nothing” strategy is self-destructive. Instead, some universities try cutting costs. Simulations for the cost strategy have four levels: 100%. 75%, 50%, and 25% faculty retention. The first is basically the “do nothing” strategy. It maintains a zero net revenue for about 5 years before the college begins to experience negative net revenues from which it never recovers.
Under 75%, 50%, and 25% faculty retention, the college sees surpluses despite lower enrollment, ergo lower revenue, because the staff reduction provides sufficient expenditure cuts for a few years. The causal structure models this in the proportionality between faculty hiring, salaries, and expenses. Cutting faculty eliminates salaries needing to be paid, so the university can spend less on instruction.
Eventually, net revenue declines whether 25% or 100% of the faculty positions are filled, but the cost strategy creates a problem particularly when too low a level of faculty retention is attempted. The more faculty that the university lets go, the greater the instruction pressure is on the remainder; fewer faculty translates to greater faculty load. Consequently, faculty academic experience declines, as foreseen by the inverse proportionality between faculty load and faculty academic experience. The ultimate impact on student enrollment is lower student satisfaction, worsened reputation, and declining application yield.
Altogether, the cost strategy entails numerous unintended consequences that make the university less attractive to students, which cuts student application and enrollment even further.
The most common strategy to combat declining student enrollment is to compete with other colleges over facility quality. To determine the impact of this revenue strategy on student enrollment, the simulation assumes a per student classroom space expansion of 10% and analyzed five scenarios: 1) the do nothing strategy, as a control, 2) no change in enrollment despite expansion, 3) 5% increase in enrollment in response to the expansion, 4) 10% increase, and 5) 20% increase.
That the expansions will entail significant construction costs is a given; the chart shows that new constructions will demand the taking on of debt that contributes to operational expenses. The question is, will the revenue from increased student enrollment be enough to offset these costs? The simulations suggest not.
From the causal model we see that facility growth benefits, directly or indirectly, faculty academic experience, student satisfaction, school reputation, and student enrollment. However, as the on-campus growth attracts more students and the university spends to maintain the per student classroom expansion of 10%, by 2023, in all four of the non-base scenarios, the debt-inflated expenses overwhelm whatever revenue the university gains from increased enrollment. It stumbles into negative net revenue again.
From a competition standpoint, the university that pursues a revenue strategy will have a significant advantage over a university that does not, but as with the cost strategy there are unintended consequences. In this case, operating costs, and expenditures per student, grow beyond what the set tuition of a slimmer student body can fund. The “solution” would be to adjust tuition accordingly, but experience tells us that a bigger price tag will only deter more students from enrolling.
Barring regular tuition hikes, in all these strategies the college will, in the long-term, run with an operational deficit. This does not bode well for colleges that must keep tuition affordable to attract a shrinking pool of economics-conscious college applicants while also generating enough revenue to maintain and develop academic and campus quality.
The character of this generation’s high school graduates is changing. The opportunities afforded by a changing economy and society have enabled many to circumvent the college route long-travelled before, pursuing families and careers without diplomas.
The simulations from Pavlov & Katsamakas (2020) suggest that colleges, to survive declining enrollments and attract students back to their campuses, must do more than tweak the number of professors, the size of classrooms, or the quality of the facilities. The truth of the matter is that colleges are businesses, and businesses must adapt to satisfy the changing preferences of their target audience (Kasperkevic, 2014). It may be that what rescues higher education is a complete re-engineering of college as it is now.
What would you, as a student or educator, recommend that colleges implement or transform?
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References:
Kasperkevic, Jana. (2014). The harsh truth: US colleges are businesses, and student loans pay the bills. The Guardian, https://www.theguardian.com/money/us-money-blog/2014/oct/07/colleges-ceos-cooper-union-ivory-tower-tuition-student-loan-debt.
Nadworny, Elissa. (2019). Fewer students are going to college. Here’s why that matters. NPR,
https://www.npr.org/2019/12/16/787909495/fewer-students-are-going-to-college-heres-why-that-matters
Nietzel, Michael. (2019). College enrollment declines again. It’s down more than two million students in this decade. Forbes,
https://www.forbes.com/sites/michaeltnietzel/2019/12/16/college-enrollment-declines-again-its-down-more-than-two-million-students-in-this-decade
Pavlov, Oleg & Katsamakas, Evangelos. (2020). Will colleges survive the storm of declining enrollments? A computational mode. PloS One 15(8): e0236872. https://doi.org/10.1371/journal.pone.0236872