New report shows higher education sector shrinks by 2 percent

Amid a wave of college closures, a new report from the National Center for Education Statistics released Wednesday found that the number of higher education institutions eligible for federal financial aid declined by 1.7 percent in the 2023-2024 academic year compared with the previous year.

The report noted that the number of Title IV institutions — those eligible to participate in federal financial aid programs — fell from 5,918 in the 2022–2023 academic year to 5,819 in the 2023–2024 academic year, representing a net loss of 99 colleges and universities.

Results

While the NCES report highlighted the decline, it did not specify how the sector had shrunk. It did not mention recent closures or mergers that might explain what happened to institutions that no longer exist.

The report also fails to note that without the creation of new institutions the decline would have been greater.

Data shared separately Inside higher education by the U.S. Department of Education show that 161 institutions closed, merged, or otherwise lost Title IV status. At the same time, 62 institutions were added during the 2023-2024 academic year, for a total net loss of 99 colleges and universities.

According to ED data, 73 institutions closed, 17 merged, and 71 lost Title IV eligibility. Of those institutions, 54 were in the for-profit sector.

While the closures and mergers have included familiar names, including Holy Names University, Iowa Wesleyan University, Cazenovia College and other four-year nonprofits that have seen closures Inside higher education covered a lot of them — many of them small, for-profit, vocational colleges.

The only area of ​​the higher education sector that grew was public four-year institutions, according to the report. The growth was driven by the conversion of two-year institutions to four-year institutions; a total of 16 institutions made the jump, according to the NCES report.

Of the 5,819 remaining colleges and universities eligible to participate in federal financial aid programs, 2,691 were classified as four-year institutions, 1,496 as two-year institutions, and 1,632 were “less than two-year institutions,” which typically focus on vocational qualifications.

The study also revealed a number of other findings, including:

• Tuition and fees for full-time, first-time degree- or certificate-seeking undergraduates, adjusted for inflation, declined across the board between the 2022–23 and 2023–24 academic years. Tuition and fees reportedly fell by 7 percent for in-state students and 8 percent for out-of-state students at public four-year institutions. For private nonprofit institutions, the figure fell by 5 percent, while for private for-profit institutions, it fell by 8 percent.
• Of the approximately 3.6 million students receiving degrees or certificates at four-year degree-granting institutions and eligible for federal financial aid, 2.2 million were enrolled at public institutions, 1.1 million at private nonprofit institutions and 246,000 at private for-profit institutions.

Perspectives

The report’s shrinkage of higher education comes as no surprise to experts in the sector, which has been battered in recent years by rising operating costs and a bleak demographic outlook, tempered by falling birth rates and growing scepticism about the value of a degree. And they believe further contraction is on the horizon.

“We will likely continue to see closures in the coming years, especially as financially strapped colleges deal with declining enrollments and the expiration of pandemic-related relief funds,” wrote Clare McCann, director of higher education at Arnold Ventures, a philanthropic group Inside higher education via email. “We need to make sure these closures are thoughtful and smart so that students and taxpayers are not left holding the bag in the event of a financial meltdown.”

Mark DeFusco, a senior consultant at Higher Ed Consolidation Solutions, called the 2 percent decline in the sector “alarming” but not surprising given current demographic challenges.

But DeFusco stressed that the contracting industry’s problems are not being felt equally: While highly selective institutions and those with national brands will do well, the “middle-class colleges” that make up the bulk of the sector will continue to face increasing recruitment challenges and the possibility of closure.

DeFusco also expressed concern about the downward trend in tuition fees.

“The tuition drop is also surprising (and we won’t know the full extent, because the true cost of attendance takes time to analyze). This is happening in a buyer’s market,” DeFusco wrote in an email. “Deflation is the next bad news for colleges. We’re already seeing discount rates skyrocket, and these discounts were designed to squeeze additional margins into already-filled classes.”

Adding five low-paying students to a class of 15 is a net gain, since the institution already offers such classes, he noted. But “a discount simply to create a class of 15 leaves very little margin,” he said.