A Conversation about Moving Beyond the Demographic Cliff: Strategic Higher Education Transformation

Imagine opening your morning news and seeing, while seeing a headline that has honestly become shockingly commonly. Yeah, way too common. Right. Another local college, maybe the one right in your town, or even the one you actually went to, is announcing these massive program cuts. Whole departments just gone. Or worse, you see an announcement of a complete total campus closure. It is incredibly jarring. And, you know, it's really easy to look at that and think, well, maybe that specific school just had a string of bad luck. Or poor management. Sure, that's the immediate reaction most people have. Exactly. But today, the mission of this deep dive is to figure out why this is happening all across the country. Because we are looking at this not as a glitch in the system, but as a permanent structural shift in higher education. The climate of higher education has fundamentally changed. I mean, we're moving past the point of treating these closures as isolated incidents. We are looking at a system-wide reckoning here. And to understand what is actually going on, we are pulling from a really comprehensive stack of research today. It's centered on a briefing by Dr. Jonathan H. Westover, titled "Beyond the Demographic Cliff." Which is a fantastic breakdown of the situation. It really is. Now, just to be totally clear for you listening, we aren't endorsing these specific viewpoints or, you know, taking a side on whether these massive institutional cuts are right or wrong. Right, because these are highly contentious decisions. They affect thousands of real dively hoods. Absolutely. So our mission today is simply to impartially unpack the analysis of why this structural shift is happening. So you can understand the arguments and the math driving these administrative decisions. Okay, let's unpack this. Because the central problem outlined in the research is that traditional tuition dependent colleges are facing an absolute existential threat. The classic, you know, everything for everyone, university model, where a regional school tries to offer every possible major and active campus life, big research facilities, that model is just fading fast. If we connect this to the bigger picture, we really have to realize that we aren't just looking at some impending challenge on the horizon anymore. We're already in it. We are actively inside a massive structural transformation right now. And by the time we wrap up this conversation, you are going to understand not just the ruthless mechanics of why this crisis is happening, but you'll also see the fascinating playbook that surviving institutions are actually using to stay alive. Right. So to understand how these colleges are going to survive, we first have to understand the specific anatomy of the threat they are facing. And that starts with stepping off what researchers call the demographic cliff. This is such a crucial concept. It really is a core concept in the brief. Essentially, we are hitting a sharp, steep decline in the traditional US college age population. And it's projected to peak right around 2025. And we know exactly why too. Yes, it all traces back to the research of Nathan Graugh. He points out that if you look at the sharp drop in birth rates following the 2008 financial crisis, I mean, you just do the math. Right, 18 years later. Fast forward 18 years. And suddenly, there are significantly fewer 18-year-olds packing their bags for freshman year. The demographic cliff is not a uniform drop off across the whole country, though. That's an important new one. Oh, interesting. How so? Well, Graugh's data shows that the Northeast and the Upper Midwest are getting hit the absolute hardest. Really? Yeah. Meanwhile, parts of the Southeast and the Mountain West are actually seeing relative stability. So if you are a regional college in, say, Ohio or Pennsylvania, and you draw 80% of your students from a 50-mile radius, you can't just recruit your way out of that. Exactly. The physical humans simply do not exist in your market anymore. It makes me think of a traditional regional university, like this massive, glorious buffet restaurant. You know, you've got the carving station, the salad bar, the dessert fountain. I love a good buffet. Right, but imagine it's sitting in a town where the population is actively shrinking. You simply cannot keep cooking 100 different dishes, staffing every single station, and keeping the lights on if only a fraction of the people are walking through the front door. That's a great analogy. But the empty tables at that buffet that just represents demography, which is really just the baseline thread. But more. Yeah, oh yeah. You also have to factor in three massive, complicating variables from the source material. These make filling those remaining seats incredibly difficult. First, there is a severe crisis in value perception, which means people don't think it's worth it anymore. Precisely. Gallup polling shows that back in 2015, 57% of US adults had a great deal or quite a lot of confidence in higher education. By 2023, that number had plummeted to just 36%. Wow. That is a staggering drop in less than a decade. And I mean, if you are a parent listening to this right now and you've looked at a college tuition bill recently, you probably know exactly what this tension feels like. Absolutely. People are just deeply concerned about whether taking on tens of thousands of dollars in debt actually pays off in the long run. And even if colleges can convince students the degree is worth the debt, they are suddenly competing with employers who no longer care about the credential at all. That's a huge shift. That is the second variable labor market shifts. Research by Sigelman shows a clear trend of major companies, especially in tech and business, just dropping four-year bachelor's degree requirements. Right. In favor of demonstrated specific skills. Exactly. I mean, the degree still carries a wage premium, but it's no longer the undisputed golden ticket it used to be. The monopoly on getting a good job has been broken. Which brings a whole new level of pressure to these schools. But the third variable is the one that really boggles my mind. It's what economists call the cost disease in higher education. Right. Bommel's cost disease. It fundamentally explains why college tuition outpaces regular inflation. Because things just keep getting more expensive to run. Well, yes. The cost to run a university instruction, maintaining historic facilities, expansive student services, regulatory compliance, it all keeps rising. But productivity doesn't scale in a classroom the way it does in, say, an automobile factory. Bro, you can't just automate teaching. Exactly. You can use robotics to build cars faster. But you still need one highly educated professor to lead a seminar of 20 students if you want to maintain academic quality. So the costs are fixed, basically. Yeah. And to cope with these rising fixed costs, colleges raise their sticker prices. But then to actually get students to enroll, they have to offer massive discounts. How massive are we talking? According to the National Association of College and University Business Officers, the average discount rate for first-year students at private nonprofits is now over 56 percent. Wait, wait. Let me wrap my head around that. If colleges are discounting tuition by 56 percent, aren't they basically running a perpetual half-off sale just to get people in the door? How on earth is that sustainable? It isn't. That is the exact mechanism of the crisis. When you are giving away 56 cents on every dollar just to fill seats, your net tuition revenue stagnates, or it even falls. Even while your operating expenses are climbing. Right. You still have to heat the dorms and pay health care premiums for the faculty. So if you are a college without a massive billion dollar endowment to cushion the blow, you just start burning through your cash reserves to balance the annual budget. Which means we are transitioning from an abstract math problem to a real-world catastrophe. Because the math of a 56 percent discount rate doesn't work, institutions are pushed to the absolute brink. Exactly. And Robert Zzymsky's research on the college stress test looked at over a thousand four-year institutions. He found that roughly 10 percent of them are facing significant markets stress right now. 10 percent. That's huge. It is. When that margin compression hits, when the half-off sale stops working, you enter this vicious cycle. The college faces credit constraints. They literally cannot borrow money at favorable rates to fix a leaky roof or upgrade the dorms. And then the campus starts looking run down which hurts enrollment even more. Right. And that leads directly to accreditation risks. Because the creditors demand strict financial stability to ensure students aren't less stranded. And ultimately, you get what researchers call strategic drift. Strategic drift? That's when leadership starts panicking, right? Just throwing things at the wall to see what sticks. Pretty much. Like, they launch a flashy new major, like, uh, eSports management because they think it will magically attract a thousand new students, even if they have no market research to back it up. Or they spend a fortune on marketing consultants without actually fixing the core academic product. They lose their institutional coherence. And this raises an important question about what universities actually run on. Because when tenured faculty face sudden cuts, when alumni see the school abandoning its historic mission just to chase a quick buck trust, is broken. And trust fundamentally is the actual currency of higher education. Exactly. Once you lose the trust of your community, your faculty, and your prospective students, it takes years, sometimes decades to rebuild. If you even can rebuild it. Right. And we really need to highlight the human element here. So you listening can grasp the real stakes. This isn't just about old brick buildings closing their doors. No, it's about real lives. When an institution fails, the impact on everyday people is devastating. The research shows that students from closed colleges complete their degrees at much, much lower rates. A large portion of them just never re-enroll anywhere. They are left holding the bag. Yeah. Debt, but no credential to show for it. And then think about the local communities. For a lot of small towns across the Midwest and Northeast, that college is the biggest employer. The town and the gown. Yeah, it's the cultural hub. It's the economic engine. all the local coffee shops, landlords, and small businesses. The consequences of inaction are catastrophic for those communities. So rather than just cataloging all this doom and gloom, we really need to look at the evidence-based responses. The survival playbook. Exactly. Yeah. Because the institutions that are surviving this climate shift are utilizing a very specific set of strategies. There are five main levers. The most immediate and often the most painful is taking a hard look at the academic portfolio. Meaning they have to decide what to cut. Yes. Explicitly deciding what to cut and what to keep. The research contrasts two major examples here that really show the right and wrong way to handle these cuts. So back in 2018, the University of Wisconsin-Stevens Point tried to eliminate several liberal arts programs. And it did not go well. It was a complete disaster. It sparked massive faculty and public backlash. The core issue was that the cuts were perceived as purely financially driven, a panicked reaction to a budget shortfall rather than a carefully considered mission-driven strategy. A transparency just wasn't there. Right. The data they used to justify the cuts was heavily contested by the faculty. And the administration actually ended up having to walk back the most aggressive cuts. But by then, the reputational damage was already done. The environment was toxic because the process lacked transparency. But contrast that with West Virginia University in 2023. Okay. What did they do? They also faced a massive structural deficit. They had to announce potential discontinuations of dozens of programs and faculty positions. It was incredibly painful. It dominated headlines and it drew sharp criticism. Sounds similar so far. But what WVU did differently was frame this as a multi-year strategic necessity. They used up-front process design and transparent data. They didn't just walk into a room and say, "Well, we are broke, so we are cutting these five departments." They showed their work. Technically, they framed it as rationalizing the portfolio for long-term survival, sharing the metrics they were using to evaluate every single program on campus. But cutting academic programs isn't enough to survive if your administrative back office is still bleeding cash. Absolutely true. That's why we're seeing states take the extreme step of physically mashing universities together to share overhead. And here's where it gets really interesting. The scale is wild. The scale is mind-blowing. Look at the Pennsylvania state system of higher education or pay hash. They literally merged six different universities into two entirely new entities. Huge undertaking. They took California, Clarion, and Edinburgh universities and mashed them into Pennsylvania Western University. Then they took Bloomberg, Lockhaven, and Mansfield and combined them into Commonwealth University. All the share back office costs. Right. Like HR, IT, and enrollment services. But wait, hold on. I have to stop right there. Yeah. This giant historic academic bureaucracies into two sounds like an absolute nightmare. Doesn't that just create one massive, unmanageable mess instead of actually saving money? Well, it is a completely fair challenge. And the research explicitly concede that the change management for these mega-mergers is brutal. Early on, leadership almost always underestimates the friction and overestimates the immediate cost savings. Because it's so complicated. Right. Integrating different IT systems, aligning entirely different faculty union contracts, merging different academic calendars, it's a logistical nightmare. So why do it? Because sometimes it is the absolute only way to fund shared infrastructure. If you have a shrinking enrollment, you simply cannot afford six separate HR departments, six separate admissions offices, and six separate software licenses. Oh, I see. The mechanism here is consolidating the transactional administrative functions into one central hub. That way, you can afford to keep the actual academic construction alive on the individual campuses. Okay. That makes sense. Survive the back office so you can afford to teach in the front office. Exactly. But beyond merging, schools are fundamentally rethinking who is doing the teaching. Matching the faculty to the actual delivery model is crucial. Like, you look at Arizona State University. ASU is great example. Yeah, they aren't tuition dependent in the same way as small regional colleges, but their model is fascinating. They deliberately differentiated their faculty, meaning not everyone is on a traditional ten-year track. Right. Instead of treating every professor the same, they have specific teaching intensive roles, specialized research intensive roles, and a massive investment in instructional designers. They broke away from the traditional one-size-fits-all model. And in the community college sector, you see similar agility. Miami-Dade College utilizes industry practitioners to launch highly agile short cycle programs. Because they can move faster. Exactly. Because they aren't bogged down by a century-old labor structure, they can spin up a cybersecurity or healthcare certificate in a matter of months. Wow. They look at regional labor demands, bring in professionals who are actually working in those fields to design the curriculum, and get students trained and employed immediately. Which is exactly what today's students and employers are looking for. The focus is shifting entirely to learner value. And this is the stuff that really lights me up. The real student success stories were institutions change how they teach. Like WGU. Yes. Western governors' university, they scaled up to 150,000 students, and they didn't do it by building fancy new dorms or a lazy river. No. They used competency-based learning. Exactly. What is that for the listener? The mechanism of competency-based learning completely abends the traditional academic calendar. Instead of a student sitting in a chair for sixteen weeks just to earn three credits, they progress the moment they can prove mastery of the material. So if you already know it, you move on. Exactly. If an adult learner comes in with a decade of accounting experience, they might pass the introductory finance modules in three days. They aren't paying for seat time. They are paying for the assessment of their skills. It respects the learner's time and money. And innovation isn't just happening online, either. Look at Georgia State University. They kept the traditional campus model, but radically invested in student success analytics. This is a huge story in Hyred. They didn't just buy a software program. They built a digital infrastructure that monitors hundreds of risk factors for every single student. And what's fascinating here is how predictive analytics actually functions on the ground. Yeah. Georgia State System flags specific behaviors. Like if a student bombs their first midterm, skips a core prerequisite, or even fails to register for the next semester on time and alert triggers. A red flag goes up. Yep. And within 48 hours, a human advisor is reaching out to intervene, getting that student tutoring or financial aid counseling. They don't just let them fail. No, they don't wait until the student fails out at the end of the semester. Through this proactive intervention, Georgia State essentially eliminated graduation achievement gaps by race and Pell Grant status. That is incredible. They proved that radical investment in keeping the students you already have student retention often generates way more revenue and mission impact than spending millions on marketing campaigns to recruit new students. That's just smart. But even with the best retention, some schools simply won't have the numbers to stand alone, which brings us to the most corporate style strategy, hitting higher ed mergers. The brief draws a really stark contrast between two recent mergers that highlights how critical timing is. On one hand, you have Mary-Mac California University. They merged into St. Leo University right before they were about to close completely. It was a desperate move. Effectively, it was an orderly closure mask as a merger because they had run out of cash and options. That's rough. On the other hand, you have Mills College. They merged into Northeastern University proactively. They saw the writing on the wall. They did. They engaged a larger, well-resourced partner early. And because they acted from a position of relative financial strength, rather than impending bankruptcy, they were able to dictate terms. Oh, that makes a big difference. Huge. They actually preserved their historic mission of women's leadership and education as a named institute within Northeastern hour. Timing is the difference between having options and having mandates. Mergers are culturally fraught and incredibly expensive to execute. But if you do it two to five years before a crisis, you can protect your core identity. You're right. If you do it two months before payroll bounces, you are just handing over the keys. Changing all of this, transparently cutting programs, merging back offices, changing faculty models, utilizing predictive analytics, navigating mergers, it requires a completely different type of leadership than what worked back in the 1990s. The expert brief outlines the necessary mindset shift for post-cliff survival and it really comes down to these three pillars and it requires continuous, ruthless evaluation. Institutions must treat portfolio governance as a permanent capability. It cannot just be an emergency rip-cord you pull during a budget crisis. You need standing data infrastructure and agreed upon metrics for what makes a program successful. You can't just guess. No. And crucially, leadership must prune an AD plant. I love that phrase prune and plant. Because of a college only cuts, it just looks defensive. It looks like a sinking ship to the outside world and nothing scares off wealthy donors or prospective students faster than a sinking ship. Exactly. You have to aggressively cut the underperforming areas so you can reallocate those exact resources to high-demand areas. You plant new seeds to signal strategic intent and future growth. To execute that, the era of the heroic president who rides in on a white horse to single-handedly save the university has to end. The second pillar. Distributed leadership. Right. Deplexity of margin compression, discount rates, and change management is just too high for one central office. You need distributed leadership. Deans, department chairs, and faculty leaders need serious financial literacy. They need to understand the business side. Yes. If the dean of the humanities doesn't understand the financial mechanics of why a 56% discount rate is bankrupting the school, they cannot effectively lead their department through a necessary restructuring. It's about empowering the middle management of the university with actual business acumen, but they also have to know what to build. Which is the third pillar. Continuous market sensing and identity coherence. Right. The brief brings up a great warning from researchers, Christians, and an airing. They point out that historically, colleges survived by just copying each other. The arms race. Yeah. The university down the road built a massive rock climbing wall. So we need a rock climbing wall. They added a master's in business, so we need one too. It was imitation disguised as strategy, all chasing the same vague idea of prestige. But now they survived by differentiating. Exactly. This goes back to identity coherence. Institutions that try to be everything and of being nothing in particular to anyone. You've to clearly articulate what you are excellent at for whom and why it matters to the labor market. It's like trying to be a Swiss army knife when the market is looking for a really good scalpel. It's a great way to put it. Right. A Swiss army knife is great if you need a tiny pair of fizzards, a decent toothpick, and a mediocre blade. But if you need surgery, you want the scalpel. Universities have to stop trying to be the Swiss army knife. Articulate exactly what you are excellent at. If you are the best regional nursing and health sciences school in the state, just be that. Be the scalpel. That is the defining shift. The middle of the higher education market is thinning out. In the future, you will have the massive, globally branded research universities with huge endowments on one side and highly focused agile, specialized institutions on the other. But the generic regional university that tries to do a little bit of everything will struggle to survive. Unquestionably. So what does this all mean for you? You are listening to this right now. You might not be a college president. But whether you are a prospective student, trying to decide where to spend your tuition money, an employer looking to hire the next generation of talent, or just a taxpayer living in a college town, the reshaping of this sector is going to directly impact you. It touches everything. It's going to impact your local economy, the tax base of your town, and the actual tangible value of the credentials you already hold. To synthesize all of this, the demographic cliff is not the end of higher education. It is a forced evolution. The environment has changed irrevocably. The institutions that communicate honestly with their communities engage their faculty in the real mechanics of the math and adapt their operating models early are the ones that will define the new landscape. It is a harsh reality, but it does leave me with a final thought. Something not necessarily in the spreadsheets or the strategic roofs, but something for you to ponder. - What's that? - Well, as colleges aggressively prune their portfolios to align perfectly with market demands, as they drop the philosophy and art history programs to double down on cybersecurity and nursing, as they hyper-specialize to become the scalpel to survive, do we risk losing the serendipity of higher education? - Oh, that's an interesting question. - Think back to that massive buffet from the beginning. Sure, it was wildly inefficient to run. The math didn't work, but the beauty of the everything for everyone campus was that a student could walk in intending to be an accountant, accidentally take a class in sociology or medieval literature to fulfill a random requirement and find a passion that unexpectedly changed the entire trajectory of their life. - That happens all the time. - It does. If that messy, inefficient, beautiful buffet dies, where will future students stumble into the unknown? - It's a real loss. - It's something to think about. Until next time, thanks for joining us on The Steep Dive.