Higher education may not be doomed, but it’s in trouble.
The pandemic hit almost every industry hard, but few were hit as hard as higher education.
Times were already tough for many American universities, mostly because of declining enrollment numbers and weakening financial support from state governments. The pandemic accelerated these trends and forced colleges — especially smaller private colleges and a ton of midlevel state schools — to gut their budgets and lay off workers to offset revenue losses.
As we emerge from this pandemic, it’s worth asking what will become of higher education in America. And if the situation is as dire as it appears, should students — and parents — seriously rethink the value of college?
To get some answers, I reached out to Kevin Carey, who covers higher education for the New York Times, to talk about the state of American colleges. We discuss the student debt crisis, why the pandemic is impacting institutions in wildly disparate ways, what kinds of schools are facing extinction, and if he thinks the future of higher ed in America will look anything like its past.
A lightly edited transcript of our conversation follows.
Is there an actual crisis in American higher education?
Parts of it are facing a crisis. It’s an enormously diverse system with lots of institutions serving different people and goals. If you’re a wealthy university that enrolls wealthy students, times are still pretty great. If you’re a small private college with a small endowment that lives year to year on tuition, these are really tough times. If you’re one of those mid-tier public universities, particularly in states that have pulled back on funding, things are bad.
New undergraduate enrollment is down by about a million and a half students from the peak in the late aughts, which was a high-water mark. We’ve seen income growth remain pretty stagnant for everyone except the well-off, and there just aren’t as many students, and families don’t have enough money to pay tuition. There’s been a real sea change in social attitudes toward debt, and people are (rightly) worried about it.
So, yeah, from a pure business standpoint, a lot of colleges are having a hard time making the numbers add up — and that will continue to get worse.
What about larger, more prestigious public universities in states that value higher education?
They have problems, but public universities in states that support higher education are doing better. Historically, support for higher education has been a fairly bipartisan or nonpartisan thing in this country. But that’s changed as the electorate has been bifurcated along education and class lines.
You can see this after the Great Recession. That was an enormous hit to state budgets. Every state cut funding to its higher education system; one, because they didn’t have as much money, and two, because in recessions, states always disproportionately cut university budgets because universities can raise prices, whereas K-12 schools and prisons can’t. The difference is that some states — like New York and California — put money back into the system as their budgets recovered. Other states, like Louisiana or Pennsylvania, that historically have done a bad job of funding higher ed didn’t put money back in, and those are places that are really struggling.
Was the pandemic a bigger hit on higher ed than the Great Recession?
We really don’t know yet. The effects of the Great Recession unfolded over the course of five years or so, mostly because the public revenues didn’t snap back for a long time. Traditionally, college enrollment is kind of cyclical. People get laid off and then they’ll go back to get a credential in order to improve their value in the labor market and also because they have the time.
The pandemic recession was different because it was so fast and so severe, but also weird and unique and it happened so fast. People were going back to school when they were’t ready to go back, and so most of it was online. It was a mess. But things definitely look bad for a lot of colleges right now since enrollment is declining.
There are lots of private colleges that are in really dire straits. How many do you think are facing extinction?
It’s a good question. Coming up with a precise number is hard, but it’s not a tiny number. Just based on publicly available financial information, you can see that plenty of schools are in danger of going out of business in the next five years or so. Even in the years leading up the pandemic, there has been a steady drip of small private colleges just going bankrupt.
A lot of these schools have actually weathered the last year better than I would’ve expected. Overall employment in the higher education sector is down about 15 percent, so I think a lot of institutions took the crisis as an opportunity to lay off people they probably wanted to lay off anyway. I hate to use the phrase “trimming fat” to describe people losing their jobs, but that’s what schools have done to reduce their labor costs.
They were also very aggressive about trying to get people back on campus last fall, even when it ran counter to the best interests of public health. But they live and die by enrollment, so they were very adamant about getting people back through the doors. Whether this has a permanent effect on enrollment, I think it’s a little hard to tell at this point.
Does reducing “labor costs” basically mean firing teachers and gutting liberal arts or humanities problems?
We don’t have those kinds of numbers. Colleges weren’t spending that much money on these things to start with, because not that many students enroll in the humanities. Most of the enrollment is in business, the social sciences, education, and health. There aren’t that many history majors anymore, not like there used to be, anyway. You can hire a history teacher for nothing in the market now because it’s absolutely saturated with people that have the credentials to be college professors. The academic labor market was in a real crisis before the pandemic. Everything that’s happened in the last year has made it worse. I think the hiring will probably accelerate the trend to more contingent faculty, particularly if this big shift to online education continues.
One thing I wonder about is whether the current model can last for much longer, especially in light of the student debt crisis. If people are continually forced to acquire mountains of debt in exchange for the promise of upward mobility, do you feel like we’re going to hit some kind of tipping point where the costs of a degree don’t match the market value and it’s just not feasible for non-wealthy people to attend college anymore? And if that happens, what becomes of higher education?
I think the tipping point is more on the institutional side. If people are no longer willing to pay money to certain kinds of colleges, then those colleges will decline and fail. But it’s not that they will go anywhere; it’s just that they just won’t go to those places.
The thing is, we have an enormously complicated and highly structured market where there are massive spaces you simply can’t enter without a degree, sometimes even by law. You can’t be a teacher without a degree. Every occupational licensure process is tied to the higher education system. Our entire health system works this way. If you want to be a nurse, you have to go to college. If you want to be part of the professional managerial class, if you want a well-compensated professional life, a stable professional life, you probably have to go to college. And you’re definitely more removed from an acute employment crisis in this economy if you have a college degree.
So I don’t think higher education is going away, but institutions will fail and the market will have to correct.
How much of the turmoil in higher ed is due to the complete embrace of the business mode? So many universities have disinvested in teaching and turned college into a post-adolescent consumer experience. Is that a big part of the story for you?
Well, there’s only one real model of success in higher education: the academic city-state. It’s the global research university. Everybody wants to be the University of Michigan or something like that. Obviously there’s the Ivy League, but the Ivy League is such a strange and esoteric place. What you really want to be is a big, successful, prosperous institution that has all kinds of smart people and beautiful buildings and sports teams and grassy lawns and football games on Saturdays and social prestige and everyone makes enough money to have a nice little house where they can ride their bike to work. That’s the model of a successful university.
But this is very much a zero-sum game, and everyone’s trying to get there at the same time. There are only so many upper-middle-class students to pay full tuition to support your lazy river and your science center. So there can only be so many University of Michigans. I think a new report came out yesterday that says that private colleges now provide on average about a 54 percent discount against the published tuition price . And that number is going up every year. So they’ve just kind of exhausted their pricing power.
If universities play this game and lose, they end up in a tough spot. What we need, from a societal and policy standpoint, is most institutions not trying to be University of Michigan. There shouldn’t be 2,000 research universities in this country. What we need is probably like 300 great research universities and 1,700 universities that are mostly there for teaching. But if status is about research and teaching is just something that you do because you have to, and so therefore you do it as cheaply as possible with basically an indifference to quality, that’s not good for anyone. Including the institution. But that’s where we are right now.
What do you think higher ed looks like in a decade? Does it even resemble its current form?
Lots of institutions that exist today will be gone. There will continue to be attrition and bankruptcy on the private side, probably mergers on the public side. Because almost all the institutions in the bottom half of the distribution of resources and prestige are going to face enormous challenges in terms of their cost structure and the related issues of declining enrollment and a decline in pricing power.
I suspect the long-term trend of more online students will continue as it has for many years. Even before the pandemic, 35 percent of college students were taking at least one online class, and something like 15 percent were totally online. That’s all going to continue. I think you have a relatively small number of institutions that will succeed at that at scale, but most of the colleges that exist now will still exist. Colleges are very resilient historically.
At what point should students and parents seriously reconsider the value of higher education altogether?
I think they should think deeply about the value of all of their choices in higher education, because there’s an enormous amount of variance in value. Not all colleges are the same. They don’t charge the same amount of money, they don’t provide the same experience, and your odds of graduating are very different depending on what institution you enroll in.
I guess the last thing I’d say is that college has become very high-stakes both from a price standpoint and a value standpoint. So no one should wait to think hard about the value of higher education. The moment is now to take a hard look at all of the choices and not believe all the promises that colleges make. Because they’re making them in their own interest, not in yours.
Author: Sean Illing