From Cliff to Escalator: Why the 5-year Higher Ed Enrollment Outlook is Less Dire Than Some May Suggest

“Looming Enrollment Cliff Poses Serious Threat to Colleges” … “Will Your College Survive the Demographic Cliff?” … “The incredible shrinking future of college” … While the impending “Demographic Cliff” — a decline in the number of traditionally college-aged people projected to impact the 2026 academic year and beyond — has been headline news in the Higher Ed space throughout recent memory, it is essential to recognize that enrollment dynamics are shaped by a multitude of variables, with some sinking, and others buoying, college enrollment. 

At the ASU-GSV conference earlier this spring, we facilitated a conversation about enrollment among a diverse set of panelists. With this esteemed group, we collectively agreed to round out the “cliff” motif, with an “escalator” as a more appropriate metaphor to capture the ups AND downs of enrollment in higher education over the next several years. While we will be faced with a declining traditional-college-aged population, a convergence of other factors — the softening job market, a rise in online learning, potential increased federal tuition assistance, and rebounding international student enrollment — all work together to provide a less dire picture of overall enrollment across the higher education sector for those institutions that position themselves appropriately. 

Demographic shift leads to an eventual decline in HS grad population, though near-term outlook is positive

While the Demographic Cliff looms large on the horizon for many institutions, its real story is not one of linear drop-off. To summarize the Demographic Cliff in a nutshell, there was a sharp decline in births during the Great Recession (approximately -3% YoY growth from 2007-10 in the U.S.), with birth rates not fully recovering to pre-Recession levels; those born during that period are nearing 18, the traditional age for first-year students. 

While the eventual Demographic Cliff will prove to be a headwind in the years to come, demographic adjustments have a variable impact on enrollment depending on which way births trended 18 years prior. Less often discussed than the Cliff is the “Demographic Rise”: a ~2% YoY increase in births from 2003–07, which will increase — and already has increased — the potential supply of first-year students from AY ’21 through AY ’25. In AY ’23 – ’25, we should see an increase in enrollment — or at least the supply of potential enrollees, as the college-going rate may vary — due to the Demographic Rise; thereafter, declining birth rates will contribute to supply downturn beginning in AY ’26. It is important to note that the scenario of potential supply impacting enrollment only plays out when the college-going rate is similar. We expect that this rate may slightly increase in the years to come, validating the idea of the Demographic Rise and dampening the impact of the Cliff. 

With all of this in mind, it’s important to note that AY ’26 is the start of a demographic decline, not a doomsday event. With the time it will take beyond 2026 for smaller high school classes to matriculate through enrollment years, the Demographic Cliff is less imposing within a 5-year outlook than the headlines might suggest, and not a major factor within the next ~10 years for graduate enrollment.

Job market is cooling, modest enrollment bump expected

The signal power of a postsecondary degree is still there, despite a rise in alternative credentials. In recent years, as recessions have hit, the number of jobs available to those without a college degree has declined, while the number available to those with them has remained largely flat. Moreover, historically, the job market has had a significant correlation with college enrollment — higher education is famously countercyclical, with more students opting to wait things out in college during recessions, and opting to get a job straight out of high school when the market is hot. 

Economists, including those we interviewed to validate our enrollment analysis, anticipate a recession and fewer jobs available within the next two to five years. As a result, we expect to see more students go back to school as immediate job and financial prospects grow muted.

Online learning expands access, but net positive impact on enrollment is uncertain 

The COVID-19 pandemic accelerated the growth of online learning seen in the decade prior to it. While most pandemic-era digital learning experiences were temporary, impacts are lasting — many institutions that were forced to rapidly digitize due to COVID-19 have kept online/hybrid options and/or launched new online programs. Student interest has increased alongside, with 95% of surveyed online students reporting their experience as “positive” or “very positive”, as compared to 86% pre-pandemic, based on data from Wiley’s Voice of the Online Learner 2022 report; our forthcoming Time for Class survey report of over 2,000 students shows that almost ¾ of students report if they could choose just one way to take class, they prefer online, hybrid, or blended format over face-to-face. Given this hike in interest, growth in availability, and heightened participation, we expect to see a continued increase in the share of students opting to learn online. 

Online learning directionally provides students with greater optionality and accessibility, and the increases in students’ interest in participation have been rapid. However, limited longitudinal data exists — given online learning’s relative newness — to conclusively demonstrate whether online expansion leads to increased overall enrollment or just more students opting to learn in that modality. As more data becomes available, Tyton will continue to hone in on how many students are choosing to learn online that would not otherwise have enrolled in Higher Ed.  

Notable federal tuition assistance shifts are unlikely in current political climate, but have high potential for impact

While federal tuition assistance policies hold potential for enhancing access to higher education, their impact on enrollment is expected to remain flat for the time being. President Biden’s promise to double the maximum Pell Grant award faces challenges given the current political landscape (instead increasing by $500 in the latest federal spending bill), and free community college initiatives are not expected to drive robust enrollment growth in the near term given their state-by-state scope and their traditional exclusion of other expenses, such as textbooks, housing, and other living expenses. With the maximum Pell award covering less than a quarter of the average cost of attendance across all institutions as of NCES’ most recent institutional data update (2021-22 academic year), federal tuition assistance would have to notably change to move the needle on enrollment. Though no one can with full confidence predict policy changes, given past changes and current legislative dynamics, a meaningful shift is unlikely. That said, if significant changes were to occur, it would likely result in major enrollment swings, making federal assistance changes an unlikely wildcard factor vis-à-vis enrollment.

International student enrollment is rebounding, particularly for graduate-level education

International student enrollment is a significant contributor to certain higher education institutions’ revenue and campus diversity. Recent geopolitical uncertainties, visa restrictions, and the lingering impact of the COVID-19 pandemic disrupted that for some, with a 15% YoY decline from Fall 2019 to Fall 2021. However, international enrollment is showing signs of recovery: from 2021 to 2022, undergraduate international enrollment was up 5% YoY, graduate by 26%. While some of this growth is a rebounding effect, when balancing pre- and post-COVID years, moderate to high continued growth is anticipated. 

In 2022, there were a total of ~1M international students enrolled in U.S. higher education, accounting for ~5.5% of all enrollment. Although international enrollment is a relatively small share as compared to total, its growth provides a solid buffer against demographic downturn: bearing in mind geopolitical uncertainties, Tyton projects heightened international enrollment in U.S. institutions, which may offset up to 25% of all demographic-induced enrollment decline in the years where the impact of the Cliff picks up.

Note: 25% cited refers to Tyton’s projection for the 2028 academic year, two years into the “Demographic Cliff”, the first year where an enrollment downturn is projected 

Institutions can play a role in shaping their own paths forward

While macro-level pushes and pulls exist in the enrollment picture, institutions and their various strategic support networks can have a hand in shaping enrollment outlooks themselves. In particular, to address enrollment challenges, stakeholders can: