Fewer college students and ultimately fewer graduates

By Jon Marcus

Pickup trucks with trailers and cars with yawning trunks pulled up onto untended lawns in front of buildings from which people lugged books, furniture, mattresses, trophy cases and artwork.

Anything else of value had already been sold by a company that specializes in auctioning off the leftover assets of failed businesses. At least one of the buildings was soon to be demolished altogether, its red-brick walls dumped into its 1921 foundation.

This was the unceremonious end of Iowa Wesleyan University, a 181-year-old institution that closed in 2023 after financial losses due in part to discounts it gave out as it struggled to attract a shrinking pool of students.

When a college closes, “all the things that are mementos of the best four years of a lot of people’s lives are sold to the highest bidders,” says Doug Moore, founding partner of a firm that has helped handle the logistics of shutting down four colleges in the last few years, including Iowa Wesleyan.

The outlook, Moore and other experts say, is that there will likely be many more such scenes in the years ahead. That’s because the current class of high school seniors scheduled to graduate this spring will be the last before an expected long decline begins in the number of 18-year-olds — the traditional age of students when they enter college.

A “demographic cliff” with big implications for the economy

This “demographic cliff” has been predicted ever since Americans started having fewer babies at the advent of the Great Recession around the end of 2007 — a falling birth rate that has not recovered since, except for a slight blip after the COVID-19 pandemic, according to the Centers for Disease Control and Prevention.

Demographers say it will finally arrive nationwide in the fall of this year. That’s when recruiting offices will begin to confront the long-anticipated drop-off in the number of applicants from among the next class of high school seniors.

But the downturn isn’t just a problem for universities and colleges. It’s a looming crisis for the economy, with fewer graduates eventually coming through the pipeline to fill jobs that require college educations, even as international rivals increase the proportions of their populations with degrees.

“The impact of this is economic decline,” Jeff Strohl, director of the Georgetown University Center on Education and the Workforce, says bluntly.

As fresh data emerges, the outlook is getting only worse. An analysis by the higher education consulting firm Ruffalo Noel Levitz, using the latest available census figures, now projects another drop in the number of 18-year-olds beginning in 2033, after a brief uptick. By 2039, this estimate shows, there will likely be 650,000, or 15%, fewer of them per year than there are now.

These findings sync up with another new report, released in December by the Western Interstate Commission for Higher Education (WICHE), which says that the number of 18-year-olds nationwide who graduate from high school each year — and are therefore candidates for college — will erode by 13%, or nearly half a million, by 2041.

“A few hundred thousand per year might not sound like a lot,” Strohl says. “But multiply that by a decade, and it has a big impact.”

Fewer students means fewer colleges

This comes after colleges and universities already collectively experienced a 15% decline in enrollment between 2010 and 2021, the most recent year for which figures are available, according to the National Center for Education Statistics (NCES). That includes a drop-off of more than 350,000 during the first year of the pandemic alone, and it means there are already 2.7 million fewer students than there were at the start of the last decade.

In the first half of last year, more than one college a week announced that it would close. Still more new research, from the Federal Reserve Bank of Philadelphia, projects that the pace of college closings could now accelerate.

The news is not all bad. For students, it means a buyer’s market. Colleges and universities, on average, are admitting a larger proportion of their applicants than they did 20 years ago, new research by the think tank the American Enterprise Institute finds. And tuition, when adjusted for inflation, is declining, according to College Board. (Housing and dining charges continue to increase.)

Ripple effects through the economy

The likely closing of more colleges is by itself a threat to the economy. Nearly 4 million people work in higher education, the NCES reports. Though the most imperiled colleges tend to be small, every one that closes translates to, on average, a loss of 265 jobs and $67 million a year in economic impact, according to the economic software and analysis company Implan.

While the falloff in the number of 18-year-olds has been largely discussed in terms of its effects on colleges and students, the implications are much broader, however.

“In an economy that depends on skilled labor, we’re falling short,” says Catharine Bond Hill, an economist, a former president of Vassar College and the managing director of the higher education consulting firm Ithaka S+R.

She points out that, based on NCES data, the United States has fallen to ninth among developed nations in the proportion of its 25-to-64-year-old population with any postsecondary degree.

“We should be aiming for No. 1, and we’re not,” she says.

The diminishing supply of young people will contribute to “a massive labor shortage,” with an estimated 6 million fewer workers in 2032 than jobs needing to be filled, according to the labor market analytics firm Lightcast.

Not all of those jobs will call for a college education. But many will. Forty-three percent of them will require at least a bachelor’s degree by 2031, according to the Georgetown center. That means more jobs will demand some kind of postsecondary credentials than Americans are now projected to earn.

Still-unpublished research underway at Georgetown forecasts major shortages in teaching, health care and other fields, as well as some level of skills shortfalls in 151 occupations, Strohl says.

“If we don’t keep our edge in innovation and college-level education,” he says, “we’ll have a decline in the economy and ultimately a decline in the living standard.”

A scarcity of labor is already complicating efforts to expand the U.S. semiconductor industry, for instance, the consulting firm McKinsey & Company warns. It’s a major reason that production at a new $40 billion semiconductor processing facility in Arizona has been delayed, according to its parent company.

A worker shortage of the magnitude projected for the coming one hasn’t happened since the years immediately after World War II, when the number of young men was reduced by death and disability, Strohl and others say. And this worker shortage coincides with a wave of retirements among experienced and well-educated baby boomers.