Today is the first day of academic summer, which is a period of relative calm even though I am never really off as a department head. (I have a modest administrative stipend in the summer, but remain a nine-month faculty member and can devote most of my time to research.) My higher education finance class this spring was a blast, as I try to make the most of getting into the classroom on a limited basis.
On the second-to-last day of class, my students asked me to put together a lecture for the final day of class on where I see the field of higher education finance going. It was a blast to put together my version of a last lecture (don’t worry, folks…I don’t plan on going anywhere for a good while). Here are the ten thoughts that I put together on the future of higher education finance.
(1) The divide between the haves and have-nots in higher education will continue to grow. I wrote a lengthy piece for the Chronicle of Higher Education on this last summer, and the trends have not changed since then. Most flagship public universities and wealthy private colleges will do well, but everyone else will struggle.
(2) Universities will struggle to figure out how centralized budget models should be. Responsibility-centered management (RCM) budgeting, in which academic units receive revenue and pay expenses instead of running everything through central administration, have been all the rage at larger universities over the last 15 years or so. But while there is pressure to force units to be more entrepreneurial, administrators also want to keep control of institutional finances. Some universities have moved away from RCM in recent years, and I’m collecting data on that to help inform several research projects.
(3) The days of adding programs willy-nilly are over. While my notes to write this piece were sitting on my desk during finals, the Chronicle came out with a nice piece showing the growth of bachelor’s degree programs relative to total enrollment. It matches my recent work at the master’s level. But program eliminations are now a hot topic among administrators as they try to free up funds or even avoid closures. It will be much tougher to start new programs unless they require little overhead.
(4) Why would anyone want to be a college president? I say that a lot, and that was before this spring’s campus protests. At the vast majority of institutions, the financial pressures require leaders to make tough decisions. The name of the game is financial flexibility, doing things like cutting programs, limiting tenure-track faculty lines, and avoiding new facilities if at all possible. Holding the line of finances may get support from the board, but it will likely infuriate other stakeholders and potentially alienate some students.
(5) Increases in tuition revenue will be hard to come by. Outside of roughly 200 universities, higher education does not have much market power to increase tuition revenue. Sure, sticker prices may increase at some private colleges, but the tuition discount rate also keeps climbing—erasing gains in revenue. And public colleges frequently have tuition increases limited or banned by state higher education agencies or legislators. That is a tough picture for higher education as operating costs rise.
(6) How long can state funding withstand growing skepticism of higher education? Across the country, state funding for public higher education has been stronger than nearly anyone expected coming out of the pandemic. But as skepticism of higher education continues, I’m not sure how long that will continue. It is possible that states continue to support community and technical colleges or even regional public universities while being less supportive of flagship universities that are viewed as being more liberal. But if overall enrollment stays flat, it’s harder and harder to envision funding increases.
(7) What happens during the next recession? Typically, enrollment increases and state funding drops during recessions. But with public support for higher education becoming shakier, it is not clear if enrollment will increase in a meaningful way whenever the next recession hits. Enrollment has helped to stabilize institutional budgets during recessions when state funding craters, but that backstop may not be there for all institutions. Colleges that serve more adult learners may do better in this regard, but not as well as during the Great Recession.
(8) College closure rates will keep ticking up, but I still don’t expect a landslide. My go-to line on closures is that colleges are stubborn or resilient, depending on who you are talking with. But there are plenty of financial headwinds that will continue to pressure colleges. I’m quite concerned about this year’s FAFSA fiasco resulting in a number of closures this summer, but most of those colleges probably would have closed this spring under a normal FAFSA cycle. Expect closures to keep coming, but most colleges will find a way to continue on.
(9) Federal policy will be a seesaw of executive actions. The only way that Congress will be able to do anything is by squeezing legislation into a must-pass budget bill, which is how FAFSA reforms happened back in 2020. Depending on the outcome of November’s election, a lengthy government shutdown may even be in the works in the near future. So expect waves of executive action and negotiated rulemaking to continue regardless of who is in charge.
(10) College is still worth it for most students—as long as they graduate. I’m excited to teach this new article by Liang Zhang and colleagues the next time I teach the class. It shows that returns generally remain strong, but they vary by field of study (hi, gainful employment!) and softened a bit following the Great Recession. Part of the benefits of college are based on the comparison with high school graduates—a group that has done fairly well in recent years. Will that trend survive the next recession? History suggests no.
I’m excited to spend a bunch of time this summer working on several research projects. Stay tuned for some research updates and data dives throughout the summer!
Robert Kelchen 
Hi, Robert — I think there’s a growing divide to be seen amongst state flagships, too, falling heavily along red/blue-state lines. Not only are red states more likely to be struggling budgetwise, but the electoral antagonisms between purple-to-bright-blue college towns and red seats of government are real, and universities are seen as seats of wokeness. K-12 systems feeding the flagships have also been under attack, administrative and budgetary, leaving more students needing remedial work and essentially unprepared for college. What this means in red states is flagships trying to hold onto the form of “university”, but increasingly, under what’s left of the finery, looking a lot like hypertrophied community colleges. Programs exist but are gutted; courses are on the books but haven’t been taught in years and there’s no one around to teach them; courses are taught but not by faculty who know the area, and discussion sections are led by undergraduate TAs; staff don’t exist to guide students and do a lot of the adjunct and informal teaching and program-development work that they once did; labs exist but are disused; tenured numbers are dropping as the able leave and remaining faculty are either looking for the door themselves, letting the fact pass in silence, or talking nonsense about why people are leaving. As faculty and course-offering numbers drop, class sizes rise, and faculty are told explicitly to spend less time on individual students. Where admin has been essentially co-opted by state governments, efforts are underway to reach directly into the running of departments, replacing faculty control with admin control, and to encode that into university/college operations manuals.
In other words, an education in one of these suffering red-state flagships is not the same thing as an education in, say, a SUNY or a UC school, a UMich or a UVa or Penn State or a UMass or a Rutgers or a UCB or UDel. And for those kids, it matters. A lot. Yes, there will still be kids who can use those flagships as a springboard to somewhere better for grad school, but it’s harder all the time. Painful to watch.
Aren’t international students important for (some) USA universities?
International students would be discussed in corresponding pieces on the future of higher education financing in Canada, the UK, Australia and Aotearoa New Zealand.
International students are important for some American universities, yes. But the share of students in US higher education from other countries (about 6%) is much lower than the other big English-speaking countries mentioned. There is the risk of volatility in international enrollment due to both US politics and politics in other nations, to be sure.
Robert, thanks for the outstanding analysis. I’d like to reprint it at the Higher Education Inquirer. In terms of resources at public colleges and universities, what will happen with state funding as more is needed for elderly Baby Boomers? Suzanne Mettler (“Degrees of Inequality”) brought this up a decade ago but I haven’t seen much concern about this recently.
That slow squeeze has been happening for a while and will continue. Over the last few years, state budgets have been strong enough in most states that funding decisions have been a bit easier. That is likely to stop soon.
We share an interest in higher education accountability w/r/t institution management and leadership, student finances, institution restructuring, et al. So much to discuss – just on HCM (below) it is a blunt instrument and its failing as a tool for meaningful change has more to do with how one gets on the list. FRS and CDR were never timely. And then the Dept of ED administers – heck, they have not yet even published the March 1st list (at least looking at the website) and that is probably 8 weeks late (used to release in 6 weeks from measurement date). Maybe they are trying deal with the FAFSA mess which is of course only adding to the already critical situation for so many.
As for Higher Ed’s issues, we really have a long overdue storm. People forget all the carnage (much of it appropriate/deserved) in for profit from 2014-2020. But I think the privates thought everything would be great when for profits collapsed – the problems go much deeper than that. HCM helped on the for profit problem (though Gainful Employment was a FAR superior tool), but IMO hasn’t done much to boost the proactivity of privates and publics. So we are where we are now with closures in the non-profit space finally picking up steam – even as the enrollment cliff has not yet even started (though it probably feels like it has to many). In general, very weak strategic management, weak financial controls and an aversion by institution leaders to confronting the brutal facts (perhaps out of fear of taking on faculty or signaling problems to prospective students) has brought us to this inevitable slow motion train wreck. I think it parallels the retain apocalypse in some ways. We have too much brick and mortar and too many institutions that lack scale and/or differentiation even as traditional demand for the product softens and financing finally gets a bit tougher. Failure of 1,000 institutions is probably inevitable – though who goes and stays is where the story has yet to be written.
Ultimately, painful as it is, the external factors are finally creating the urgency for change that should not have been needed but sadly was needed. For profit mostly is done restructuring (and doing surprisingly well right now). The non profit space must act now and many finally are – or they are abruptly closing, which in some cases could have been avoided. That said, I laud proactive closures like Cabrini and Fontbonne. They did it the correct way. University of the Arts in Philly, was an avoidable implosion. I suspect it could have been merged or even saved, but hopefully its “sudden” failure spurs others to proactively addressing their existential crises.
If you would like to talk sometime send me an e-mail and maybe we can talk (I actually prefer phone ). I spent 7 years in higher education as a finance leader. I comment occasionally on it when I see something interesting. For some reason, despite all my googling, I never ran across your blog.
Cheers.
“And then the Dept of ED administers – heck, they have not yet even published the March 1st list (at least looking at the website) and that is probably 8 weeks late (used to release in 6 weeks from measurement date). Maybe they are trying deal with the FAFSA mess which is of course only adding to the already critical situation for so many.” LOL! Yes, FAFSA is a distraction for “Closed Schools” list — I even filed a FOIA request for the unpublished “Closed Schools” list, but they repeated the same line, that this was publicly available through the new site. Never checked to see if it was true. Incompetents.
I also FOIA’d to see what US ED was going to do with AI, and (guess what), there were “no documents responsive to” my request. LOL! Clueless and blind!
I can’t make any sense of the new Closed Schools website–the old one was so much easier to use. And I think that they would likely blame the FAFSA and other items (such as gainful employment and income-driven repayment) for not updating the HCM list.
Update: FSA updated the closed schools website and we’re back to the regular Excel format! https://fsapartners.ed.gov/additional-resources/reports/weekly-closed-school-search-file
FSA Closed Schools reports are still garbage!
Clueless idiots with no sense duty to public.
Old PDF style reports are here, but they are incomplete and discontinuous.
https://fsapartners.ed.gov/additional-resources/reports/monthly-closed-school-reports
Glen