The College Enrollment Crisis

Summary

The video discusses the financial instability of U.S. colleges, highlighted by the closure of Birmingham-Southern College. It examines how declining birth rates, reduced state funding, and rising tuition costs have left many institutions vulnerable to financial collapse. With fewer high school graduates entering college, especially at smaller schools, universities face a growing risk of closure. The video urges prospective students to consider the financial health of the institutions they are applying to, while also suggesting that diversifying skills through programs like Brilliant may help students stay competitive in an increasingly uncertain landscape.

Takeaways

• 😀 Birmingham-Southern College, a 168-year-old institution, closed its doors unexpectedly, leaving its baseball team stranded mid-tournament.
• 😀 Many students don't consider the financial stability of their chosen school, even though the risk of closures is rising in higher education.
• 😀 Over 1,200 for-profit community colleges closed between 1996 and 2023, along with a significant number of 4-year non-profit colleges.
• 😀 The expected decline in college enrollment starting next year, due to smaller birth cohorts, could cause a major shift in the higher education landscape.
• 😀 State funding for colleges has dramatically decreased since the Great Recession, with some states cutting higher education appropriations by over 30%.
• 😀 With reduced state funding, colleges have been forced to raise tuition, shifting the financial burden from the state to students and families.
• 😀 Despite rising tuition, universities have remained financially fragile due to their heavy reliance on student enrollment for revenue.
• 😀 Small colleges, which are particularly reliant on local populations, are at a greater risk of closure, as a few lost students can significantly impact their finances.
• 😀 Many universities, particularly public ones, have become increasingly dependent on out-of-state and international students to make up for local shortfalls.
• 😀 Prestigious schools, like Columbia and Johns Hopkins, are less affected by these trends due to their large endowments and strong brand recognition.
• 😀 Prospective students should consider the financial stability of their college, looking for signs of enrollment decline and reliance on tuition revenue as indicators of potential risk.

Q & A

Why did Birmingham-Southern College close, despite its long history?

Birmingham-Southern College closed due to financial instability. Over the years, the college faced a mix of declining enrollment, reduced state funding, and rising tuition costs, which made its continued operation unsustainable.

What impact did the Great Recession have on higher education?

The Great Recession led to significant cuts in state funding for colleges. As a result, universities had to either reduce expenses or increase tuition. Most chose the latter, which contributed to the rising cost of education.

How does the demographic shift in the U.S. affect higher education?

The decline in birth rates, especially since the Great Recession, has led to a smaller pool of potential college students. This, combined with declining state funding, creates a financial challenge for many institutions, particularly smaller colleges.

What is the main reason for the increase in college tuition over the years?

The main reason for rising college tuition is the decrease in state funding. With fewer public funds available, universities increased tuition to make up the financial gap, shifting the burden from taxpayers to individual students and their families.

How are smaller colleges particularly vulnerable to financial challenges?

Smaller colleges are vulnerable because they rely heavily on tuition revenue, which can fluctuate significantly with small changes in enrollment. Additionally, they typically have fewer financial resources and limited ability to cut costs quickly.

What are 'sellers' and 'buyers' in the context of higher education?

'Sellers' are prestigious universities like Columbia and Johns Hopkins that can attract more applicants than they have spots for, allowing them to set high tuition rates. 'Buyers' are smaller, less selective institutions that rely on their local communities for enrollment and funding.

What does the decline in state funding mean for public universities?

The decline in state funding means that public universities are becoming less publicly funded and more dependent on tuition fees. This trend has led many public universities to adopt a model more similar to private institutions, where students bear a larger portion of the cost.

How many schools are estimated to be at serious financial risk?

It is estimated that about 20% of all schools face substantial financial risk, with around 560 public and non-profit 4-year universities at serious risk of closure due to declining enrollment and financial instability.

What role do out-of-state and international students play in university finances?

Out-of-state and international students are often charged higher tuition rates, which helps universities make up for funding shortfalls caused by lower state appropriations and declining in-state enrollment.

How can students mitigate the risks associated with attending small colleges?

Students can mitigate risks by carefully considering whether the school has experienced long-term enrollment declines, and by diversifying their education, for example, by pursuing additional skills through platforms like Brilliant.