Top 10 threats to sustainability of HE institutions and how to beat them

Profile picture for user Otmar Zewald By Otmar Zewald December 18, 2017
Summary:
Sustainability of higher education institutions faces threats as student choices change. Unit4's Otmar Zewald suggests how campuses can plan for the future

College students group walking on campus © Tyler Olson - Fotolia.com

Plunging declines in student enrollment, widespread tuition discounts and diminished state support are taking their toll on higher education campus revenues. Compared to a decade ago, many institutions lack the financial surpluses they need to cover their long-term investment needs, and are struggling to afford the kind of educational program they wish to offer.

This article identifies 10 pervasive threats that will jeopardize the sustainability of higher education institutions over the next decade and beyond. It also recommends six strategies for adapting successfully to the new environment.

1. Decline in student numbers

In 2016, only 29% of public universities and 41% of private universities were meeting enrollment goals, with most institutions reporting cascading declines in undergraduate enrollments year-on-year since 2011. At the same time, the number of institutions chasing the same shrinking pool of students continues to increase.

2. Professional programs rise, liberal arts fall

Student preferences are trending toward larger (versus smaller) and metropolitan (versus rural) institutions, and toward career education and STEM programs versus study in the liberal arts. Current marketing strategies and admissions operations are not persuading students to buck these trends.

3. Fewer new international students

Competition for international students has intensified as more colleges spend time and money recruiting in other parts of the world. Whereas institutions used to compete against comparable institutions in the same state or peer group, they are now competing against institutions with very different value propositions and fee structures. Massive competition has led to a price war. Offering significant tuition discounts is now commonplace in the race to attract international students.

4. Reduced government support for HE

The Great Recession earmarked a reduction of federal support for higher education, including the budget of the Pell Grant program. State budgets have also been impacted, with nearly every state cutting funding for higher education post-2007. Funding pressures have forced public universities to become more dependent on tuition revenue, and students to become more reliant on loans through private banks.

5. Squeezing of the middle classes

Middle-class families are hollowing out as more Americans slip further into lower income groups, making it more difficult for these families to foot the ever-increasing cost of a college degree. Moreover, even as many colleges double their efforts to support students from lower-income backgrounds, they find budgets devoured by the additional financial aid required to do so and the added support services some of these students need if they are to succeed.

6. Changing student demographics

The majority of colleges and universities are optimized for educating 18- to 22-year-old students who attend classes on campus full time for up to six years. However, these so-called traditional students now make up a minority of graduates. Demographic projections suggest that part-time, financially independent, mature students, who typically arrive at college with 30+ credits (from dual enrollment or transfer) will be responsible for the majority of enrollments over the next 10 years.

7. Rose-tinted thinking

Most institutions are justly proud of their university's mission and long-standing programs, even when those programs no longer resonate with students. The status quo is a recipe for disaster, however, when those involved in strategic planning imagine a rosy future without tethering it to demographic shifts and changing student interests.

8. Pressure to reduce costs or face taxation

The richest schools are getting richer, yet tuition and student fees keep going up. In the light of this, states are thinking about forcing colleges to direct a greater percentage of their endowments toward financial aid instead of operating tax-free hedge funds – with penalties for non-compliance levied through the tax code.

9. The return-on-investment mindset

While employment prospects for graduates have improved since the Great Recession, many students fear that if they pick the wrong institution or the wrong major they will be saddled with large debt and poor job prospects. Thus, the tendency is to view higher education purely in terms of its economic benefit.

10. Sharing the risk of student loan default

In the face of sharp tuition increases, policy makers are under pressure to hold institutions accountable for the quality and cost of their programs. One proposal gaining traction is "risk-sharing," the idea that colleges should bear some fraction of the financial risk if students fall delinquent on their loans after school. Risk-sharing strategies could see institutions losing access to federal funding unless they retain some of the financial risk on the loans their students take on.

How to prepare for the future

When it comes to strategic planning, we can identify six broad lessons.

1. Improve graduation rates

Currently, only 60% of first-year students complete a bachelor's degree in six years. Identifying and intervening with at-risk students while there's still time to turn them around is the best way to lift graduation rates, grow enrollment and increase tuition revenue.

2. Diversify to attract new student populations

Meeting the needs of today's post-traditional student is the key to any growth strategy. Institutions can take advantage of modern CRM systems to offer unlimited enrollment flexibility, so that they are no longer tethered to traditional term-based enrollment. For example, Unit 4's Student Management allows institutions to provide full support for online and community-based education alongside traditional programs that accommodate the needs of a variety of learners.

3. Clarify potential career opportunities

Academic leaders should be able to offer data-backed evidence of typical career outcomes from all degree programs to address students' and parents' concerns about return on investment.

4. Redesign the curriculum based on need

Institutions that add new programs without closing down old programs face a breadth of activities that are much too complex for staff to manage with any efficiencies of scale. If the campus is offering programs that no longer appeal to the students it seeks, it should redesign its curriculum – based on extensive market research, not guessing.

5. Automate

Ultimately, in order to reduce administrative costs without diminishing service, campuses will need to consolidate operations by eliminating low-value work, streamlining operations and automating more. With the right tools in place, moving from fragmented to scale operations can help colleges to clarify roles and create a culture of functional and individual accountability, better serving students while reducing costs.

6. Data must inform all planning

Colleges and universities should be using technology as a tool to empower administrators and their boards to make strategic rudder adjustments in a timely manner. Without data to support their decisions, institutions risk implementing campaigns that don't differentiate the institution or its programs in ways that attract today's students.

Final thoughts

Cascading declines in student enrollment and other realities are changing the higher education sector. To optimize success, institutions must use data to identify and attract students, develop programs to meet those students' career goals, and follow through with strong, streamlined recruitment and enrollment efforts.

Many institutions find that their legacy student information systems make it harder to adapt to new models, hampering these efforts. Shadow systems and siloed operations create an opaque information hub that discourages collaboration, undermining data integrity. And disconnected administrative systems make it difficult to craft budgets, control spending, and quantify the RoI of human capital.

Growth strategies incorporating a new approach to core Student Information Systems can help institutions build comprehensive, customized, data-backed growth initiatives across the entire student life cycle. This results in increased enrollment and fundraising, degree programs that meet the needs of post-traditional learners, recruitment initiatives that attract the best-fit students, and improved institutional effectiveness. Conversely, hope is not a strategy!