The Coming Demographic Cliff For Colleges

by | Feb 9, 2023

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Being a wealth manager during 2008-2009 was unbelievably stressful. As I write in my upcoming book, “The Uncertainty Solution,” the Financial Crisis of 2008 was “a watershed event that sliced my life into two parts and changed who I am professionally and intellectually. It exposed massive cracks in my understanding of how the financial world works and forced me to face the uncertainty inherent in investing and stop searching in vain for certainty where it doesn’t exist.”

Of course, I wasn’t alone in finding the Financial Crisis stressful. One manifestation of the stress everyone was feeling was that the number of births during the Financial Crisis plummeted in the US. And birth rates have continued a downward trend since then.

According to VOX, “from the early 1970s until 2007, the number of annual births per 1,000 women ages 15 to 44 stayed between roughly 65 and 70. Starting in 2008, the ratio went down, down, down, to 56 in 2020, the lowest rate in American history. There were 4.3 million births in 2007; last year [2021], there were 3.7 million.” So, the US is experiencing a smaller number of births on a larger population base.

The decline in births that began in 2008 will have a major effect on colleges in 2026 as the number of 18-year-olds entering colleges will decline. According to Inside Higher Ed, the number of freshmen entering college will drop as much as 15% starting in 2026. Plus, COVID also laid a demographic time bomb as births dropped by another 4% in 2020. The effect on colleges and universities will be huge as they scramble to fill their ranks with students. Elite institutions will weather the demographic storm well since they are targeting a small niche of college students. Regional and less selective colleges will suffer the most. The demographic cliff will put financial strain on a large swath of colleges and likely will result closures.

Throw in that more parents and students are questioning the value of a four-year degree, and the outlook for many colleges is dire.

Then there are the broader economic issues of a declining birthrate. That’ll have to be the topic of a future IFOD.

3 Comments

  1. I’d love to hear your thoughts, John, on how these numbers will ultimately affect our already shrinking workforce. A great topic for a future IFOD.

    Reply
  2. Another reason why community colleges are often the best choice for anyone not interested in the broad academic scope of a four-year college. Places with community colleges are better able to withstand the adverse effects of a loss of a major employer or economic slowdown.

    Reply
  3. have no fear Universities and colleges are expert survivors — they will just shift their gaze and set their sights on enrolling life long learners, career switchers, retirees looking for purpose and a host of credentialling programs. These audiences are also very scalable as much can be done online. I do believe elite universities will survive by ever burnishing their brand and of course they are already where most of research and scholarship occurs. I expect to see ever tightening relationships between industries of all kinds and academia.

    Reply

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