Demographic Challenges Facing Colleges and Universities September - - PowerPoint PPT Presentation

Demographic Challenges Facing Colleges and Universities

September 17, 2019 Presented By: William Jarvis, Bank of America Kenneth Redd, NACUBO Michael Strauss, Bank of America

Speakers

Kenneth Redd

• Sr. Director, Research and Policy Analysis

National Association of College and University Business Officers (NACUBO)

Michael Strauss

Managing Director

• Sr. Institutional Portfolio Strategist

Bank of America

William Jarvis

Managing Director Market & Delivery Executive Bank of America

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Demographic Trends

• Millennials (23-38) now outnumber Baby Boomers (55-75), but Generation Z (7-22) is coming up

fast.

• Millennials have more income than older Americans had at the same age but have less wealth,

due in part to student loan debt.

• Nearly half of Generation Zers (48%) are racial or ethnic minorities.
• Hispanics are projected to become the largest minority group in the electorate in 2020 at 13.3%

(32 million).

• The U.S. unauthorized immigrant population in 2016 was 10.7 million, its lowest level in 12 years.

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Social and Family Trends

• One in five Americans lives in a multigenerational household, up from 12 percent in 1980.
• One in four U.S. parents is unmarried, up from 7% 50 years ago. 50% of U.S. adults over 18 are married

today, versus 72% in 1960.

• Women are now obtaining more bachelor’s degrees than men.
• The educational gap in marital status continues to grow. In 2015, 65% of adults with 4-year degrees

were married, versus just 50% for those with no education beyond high school.

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Economic Trends

• Household incomes are at a record, but income inequality has grown among the general

population and is more pronounced within racial and ethnic groups.

• Student loan burdens and the lagged effect of the Great Recession have been key factors in the

following developments:

• Compared with previous generations, Millennials are delaying or foregoing marriage and have been

slower in forming their own households and having children.

• In 1968, a typical American woman and man married at 21 and 23, respectively. 50 years later, these

figures have increased to 28 and 30.

• In 2018, 15 percent of Millennials over 25 still lived at home, versus 8 percent of Baby Boomers at the

same age.

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Looking for Future Students

Demographic and immigration trends raise the risk of a shortage of U.S. college students within the next 10 to 15 years.

• By 2016, 48 percent of Millennial women were mothers, down 9 percentage points from Gen Xers

at a similar age.

• The U.S. birth count fell to less than 3.8 million in 2018, a two percent drop from 2017, to the

lowest number of births in 32 years.

• In comparison, the U.S. birth count peaked at 4.3 million babies born in 2007. Thus, in 11 years

the annual domestic birth rate has declined by more than 12 percent.

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Is the Boom in Foreign Students Ending?

• Foreign student enrollment at U.S. colleges and universities doubled between 2008 and 2016,

from 179,000 to 364,000.

• Students from China, India, and South Korea accounted for 54% of all new foreign students

pursuing college degrees in 2016.

• Overall college immigration from El Salvador, Guatemala, and Honduras increased 25% from 2007

to 2015.

• However, U.S. government policies have started to limit the influx of foreign students, just ahead
• f the time when colleges may need them the most.

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A Student Population Shortfall: Nathan Grawe

• College-age population is expected to drop five percent in the Northeast and Midwest by the mid-

2020s.

• Grawe projects a second drop of close to 10 percent from 2026 to 2031, fueled by the peaking of

domestic births in 2007 and the shift towards a greater minority population. The Northeast and Midwest will be hit hard.

• The importation of foreign students has counterbalanced demographic trends in the last decade,

but that may soon end.

• The higher level of education among Millennial parents and an increase in the Asian-American

population may produce a partially offsetting greater yield to post-high school education.

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Meeting the Demographic Challenges

The Chronicle of Higher Education reported that 52 percent of private colleges and 44 percent of public colleges did not meet their enrollment goals for 2017-18. The situation may get worse over the next 10+ years.

• Expand your educational pool to include young adult and senior programs.
• Make the educational process flexible: include on-line, part-time, distance, and certificate programs.

Focus on learning for life, not just over four years.

• Market effectively and go South. In 2000, the Southern states represented one-third of high school

graduates; in 2025 it could be close to 50 percent.

• Set realistic budgets, establish strategic educational relationships, define your specialty, and right-

size your institution.

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Meeting the Demographic Challenges (cont.)

In addition to these demographic changes, colleges have also faced these financial challenges:

• Rising costs of attendance and falling enrollment
• Increasing tuition discount rates and costs of institution-based financial aid
• Challenges to existing business models—need to change pricing, enrollment, and revenue sources

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College List Prices Continue to Rise

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000

87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18

Average Tuition and Fee Price at Four-Year Public and Private Colleges and Universities, Academic Year 1987-88 to 2017-18 Public Four-Year Private Nonprofit Four-Year

Source: The College Board, Trends in College Prices, 2017. Tuition and fee prices are in constant 2016 dollars.

$15,160 $34,740 (+129%) $3,190 $9,970 (+213%)

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Many schools have increased their spending on institutional grant aid to attract more students

2003-04 2008-09 2017-18

• Pct. Change

Federal Pell Grants $17 $20 $28 +64.7% State Grants $8 $9 $11 37.5% Institutional Grants $21 $26 $49 +133.3% Federal Loans (subsidized & unsubsidized) $45 $51 $59 +31.1%

Source: The College Board, Trends in Student Aid 2018. Dollars not adjusted for inflation.

Total Undergraduate Grant Aid (in billons), by Aid Source, Academic Year 2003-04 to 2017-18

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Increases in financial aid spending have led to higher and higher institutional tuition discount rates

39.1% 39.9% 41.6% 42.0% 44.3% 44.8% 46.4% 47.1% 48.0% 48.2% 50.5% 52.2% 34.7% 36.9% 36.1% 36.4% 38.6% 40.2% 39.8% 41.3% 43.0% 43.2% 44.6% 46.3%

30.0% 35.0% 40.0% 45.0% 50.0% 55.0%

First-Time, Full-Time Freshmen All Undergraduates

Source: NACUBO Tuition Discounting Study, 2007 to 2018; data are as of the fall of each academic year. *Preliminary estimate.

Aver verage I e Institutional T Tui uition D Disc scount Rate—Total U Under ndergraduate e Institutional Grant S Spen ending a as a Percentage o e of Gross ss T Tui uition a and nd Fee R e Rev even enue– at Private C e Colleg eges es a and U nd Uni niver ersi sities, es, 2 2007-08 t to 2018 2018-19* 19*

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Many small private colleges have seen even larger increases in institutional discount rates

NACUBO Constituent Group

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19*

Comprehensive 34.1% 37.1% 36.3% 36.0% 38.8% 39.2% 43.8% 42.9% 43.3% 44.2% 46.5% 47.2% Research 33.8% 37.4% 38.9% 38.8% 40.9% 43.0% 43.1% 43.2% 42.4% 43.3% 45.8% 47.0% Small Institutions 40.5% 40.6% 42.8% 43.3% 45.6% 46.0% 47.2% 48.5% 49.5% 49.9% 51.7% 53.7% All Institutions 39.1% 39.9% 41.6% 42.0% 44.3% 44.8% 46.4% 47.1% 48.0% 48.2% 50.5% 52.2%

Source: NACUBO Tuition Discounting Study, 2007 to 2018; data are as of the fall of each academic year. *Preliminary estimate.

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Higher discount rates have led to much slower growth in tuition revenue

5.4%

• 0.8%

1.6% 5.4%

• 0.3%

3.4% 1.1% 2.1% 1.5% 2.8%

• 0.8%

0.4%

• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Source: NACUBO Tuition Discounting Study, 2007 to 2018; data are as of the fall of each academic year. *Preliminary estimate.

Average Annual Percentage Change in Net Tuition Revenue per Full-Time Freshman in Current Dollars, 2007-08 to 2018-19*

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59.8% 34.0% 6.2% Increase in Freshman Enrollment Decrease in Freshman Enrollment No Change in Freshman Enrollment

Additionally, many private colleges have seen declines in enrollments, despite rising discount rate

Percen entag age o e of Participating I Institutions t that E Exper erien enced F Freshmen en Enrollmen ent C Chan anges es b bet etween en 2015 2015-16 16 and 2018 2018-19 19

Source: NACUBO Tuition Discounting Survey, 2018.

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Because of these trends, many institutions have turned to new strategies to help improve their finances and increase enrollment

4.0% 7.7% 14.6% 24.3% 39.2% 65.6% 69.3% 75.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Other No New Strategies Tuition Pricing Strategies Changed/Added Facilities Changed/Added Academic Programs Financial Aid Strategies Student Retention Strategies Student Recruitment Strategies

Percen entag age* e* o

• f Institutions that U

Used ed or Implem emen ented S Strateg egies es t to Increa ease e Net et T Tuition R Rev even enue i e in Fiscal al Y Year 2 2018, by S Strateg egy T y Type

Source: 2018 NACUBO Tuition Discounting Study *Total does not equal 100% because institutions may have implemented multiple types of strategies.

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Other recent strategies for addressing changes in demographics & revenue

• New university consortia (e.g., Universities at Shady Grove)
• Campus mergers/consolidations (e.g., University System of Georgia)
• University collaborations/shared services (e.g., Carleton College & St. Olaf College)
• Adoption/expansion of academic programs in nursing, health sciences, and other high-demand

fields (e.g., Cedar Crest College)

• Public/private partnerships (P3s) for facilities and academic programs
• Tuition resets and other pricing strategies (e.g., Muskingum College, Utica College)

Source: NACUBO Economic Models Project

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Questions & Answers

Kenneth Redd

• Sr. Director, Research and Policy Analysis

National Association of College and University Business Officers (NACUBO)

Michael Strauss

Managing Director

• Sr. Institutional Portfolio Strategist

Bank of America

William Jarvis

Managing Director Market & Delivery Executive Bank of America

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Append ndix

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Sources

• Demographics and the Demand for Higher Education—Nathan D. Grawe (2018).
• Knocking at the College Door—Western Commission for Higher Education (2016). www.wiche.edu/knocking
• Pew Research Center. www.pewresearch.org
• Chronicle of Higher Education
• HEPI
• Statista.com
• NACUBO Economic Models Project https://www.nacubo.org/leadership-initiatives/economic-models-project
• NACUBO Tuition Discounting Study https://www.nacubo.org/research/2018/nacubo-tuition-discounting-study

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