For the last six years we have sounded louder and louder concerns that the higher-education bubble would eventually deflate. However, no one at the time anticipated that a virus-pandemic would be the pin that pops it all.
Take, for example, the 2020 fall semester, the number of first-year undergraduate students are in freefall across the country, down 16%, when compared to 2019 fall semester, according to a new report by the National Student Clearinghouse Research Center (NSCRC). Overall undergraduate enrollment slid 4% from this time last year, mostly because of the 13.7% drop in international students.
Naked Capitalism's Yves Smith points out that virus-related enrollment declines are happening at a time when colleges and universities' revenues were already slumping, potentially creating a perfect storm of campus closures.
"Empty seats are inflicting financial damage on colleges already reeling from the pandemic. Earlier this year, when the virus began spreading, many schools cleared their campuses of students and refunded housing costs. With enrollment warning, revenue from tuition, dormitories and dining halls is being hurt at a time when some institutions are posting low endowment returns," Bloomberg said.
Jack Maguire, the founder of the enrollment-consulting firm Maguire Associates and former dean of admissions at Boston College, warned that "colleges are losing billions of dollars" as the virus continues to rage across the country.
"It may not be the end of it if this new wave hits and students are sent home again," Maguire said.
NSCRC showed enrollment slumps were the most drastic at community colleges, down 9.4% overall, and 22.7% for first-year students. Undergraduate enrollment at four-year public colleges and universities fell 1.4% overall, and down 13.7% for first-year students. As for private nonprofit colleges, overall enrollment was down 2%, and -11.8% for first-year students.
Despite undergraduate enrollment down across all types of institutions, private for-profit colleges recorded a 3% increase.
Nationwide, the Midwest experienced the steepest declines, sliding 5.7%. Bloomberg notes, "schools in the region have enrolled fewer students in the last several years, mainly because of demographic trends."
Regional Enrollment Percentage Change From Previous Fall Semester
There was one arguably (are they merely staying in school rather than venture out into the 'real' world and face an ugly labor market) bright spot in the report - a 2.7% increase in graduate student enrollment - but, overall, the entire report is just more troubling news the higher education bubble that faces implosion. What this means is that financially weak colleges, those with the weakest balance sheets, will be the first to shutter operations. Not even state schools will be immune to the downturn as state and local taxes are set to plunge.
In September, Moody's Investors Service downgraded the credit outlook for colleges and universities to negative. Disruptions in enrollment, declining international students, and a decline in research grants and contracts were some reasons Moody's outlined for the downgrade. They noted international students account for about 5% of total college and university enrollment.
Growth Of Chinese Undergraduate Students In US Set To Reverse
Inside Higher Ed, a trade publication, notes since 2016, that at least 20 private colleges have shuttered their campuses. The slump is set to pressure financially weak schools first but could result in large state schools to close regional campuses to cut costs.
To sum up, the great college bull market is over. At the start of the year, we cited Mauldin Economics, who said:
"20% of colleges and universities will shut down or merge in the next ten years."
... and maybe the virus pandemic has accelerated the collapse of higher education.
One last thing: What happens to metro areas that were built primarily around colleges? Does the higher education bust trigger a domino effect in the economy?