Trends impacting higher education organizations are expected to create both opportunities and challenges in 2022 and beyond.
Those trends include revenue growth, tuition increases, and cost-cutting. Tuition increases also affect the competition between community colleges, colleges, and universities.
Colleges and universities are projected to see slower revenue growth through 2027.
This slower growth could lead to a few changes in direction.
The labor market is expected to expand which could discourage people from starting or staying in school. Combined with a stagnant high school retention rate, college enrollment is expected to decelerate.
Growth in online education could enable colleges to serve more nontraditional students at lower costs. Online courses may increase interest in industry institutions, boosting enrollment and revenue.
State and local appropriations are poised to grow as unemployment likely declines and the government recovers lost tax revenue.
Tuition and Community Colleges
Continued tuition increases could make it more difficult for some students to pursue higher education.
As a result of the trends below, the number of colleges and universities will likely increase an annualized 1% to 2,120 enterprises over the next five years.
Rising tuition costs could change students’ plans for their educations.
While the federal government took steps to increase student loan availability, the rising cost of a four-year college education could steer students toward more affordable options.
That could lead to competition from community colleges and trade schools. The federal government has taken measures to support these institutions.
Competition from community colleges will likely remain moderate as traditional colleges and universities dominate the higher education market.
Because many students transfer to a four-year institution after completing two years at a community college, lower tuition for community colleges may ultimately result in higher demand for industry institutions.
According to IBIS World, industry employment is projected to increase an annualized 1.2% to 3.3 million workers over five years. Additionally, the transition to relatively inexpensive forms of labor is expected to bolster industry profit over the coming years.
However, industry institutions operate on a not-for-profit basis, and colleges and universities could continue to cut costs to bolster the long-term sustainability of higher education.
Universities are expected to merge redundant departments and courses to reduce administrative costs.
Tenured Versus Part-time Positions
The number of tenure-track positions, which typically have higher salaries, will also likely be reduced. Instead, industry institutions could continue to hire part-time lecturers and nontenured professors at lower wages.
Institutions will also likely further implement online education programs to lower costs and compete with community colleges and for-profit universities.
Online education reduces costs because classrooms aren’t required and a small number of professors can instruct a substantial number of students. By increasing the number of courses available online, universities could reach new markets.
Massive Open Online Courses (MOOC)
Start-ups that provide a platform for universities to offer online courses could continue to gain traction over the coming years.
While some MOOC services may pull students away from traditional universities by offering free and low-cost education services, traditional universities provide benefits not found in online education services such as access to professors, contact with peers, and accreditation from an established institution.
These factors limit direct competition between industry institutions and MOOC services. While MOOCs and similar online education services could make higher education more accessible, they aren’t expected to significantly reduce demand for industry services.
Future Opportunities and Challenges
Based on the above trends, higher education organizations could face several challenges over the next two to three years. However, there are several opportunities as well.
- Mergers and acquisitions (M&A). Mergers, acquisitions, alliances, and consortiums are becoming commonplace. Small, faith-based institutions are a prime target for acquisitions. Many institutions are aligning with other colleges or universities to share services such as digital platforms to save on costs.
- Personal wealth and market performance. Institutions for fiscal year-end (FYE) 2021 posted record market performance and endowments, and investments pools are at all-time highs providing purchasing and institutional aid power.
- Federal and state funding. Public and private schools will continue to see infusions of government funding. The Biden administration seeks affordable college and free community college for all. Conversely, as funding increases in the public sector, the private sector will continue to feel pressure to compete and keep tuition rates low.
- Construction. As institutions emerge from the COVID-19 pandemic and lockdowns, they’ll likely move forward with campus expansions and deferred maintenance plans.
- Digital transformations. Many institutions transformed their digital programs due to COVID-19. Some schools outside of major East or West Coast cities are using hybrid models. Many students and faculty prefer a return to campus and in-person learning, however.
- Inflation. Personnel costs are a major operating expense in higher education and will have a great impact as they rise. Cost-of-living adjustments face double-digit growth. The increased cost of goods, especially construction materials, will delay capital expansion and deferred maintenance.
- Workforce shortages. The shortage of personnel and availability of candidates in the workforce will drive costs up. Baby boomers are retiring at record rates. Additionally, the shortages will create an inability to deliver services to students. Also, those shortages could prevent institutions from effectively implementing strategic plans.
- Compliance and regulations. Continued and increased compliance and state and federal regulations on higher education are driving overhead and personnel costs up.
We’re Here to Help
For guidance on how to take advantage of opportunities or overcoming challenges for your organization, contact your Moss Adams professional. You can also visit our Higher Education Practice for related articles.