by Bill Conley and Bob Massa
Enrollment Intelligence Now
May, 2024
May is the month of reckoning for first year enrollment metrics. Not so long ago, it was a single day- May 1 (Candidates Reply Date-CRD)- that signaled the likelihood of hitting the enrollment target (read: tuition revenue goal). In recent years, May 1 has become mutable and, in 2024, the FAFSA fiasco renders the CRD irrelevant for most colleges.
We chose this month to share this musing because we suspect that there will be many enrollment leaders pressed to make sense of the slower unfolding of enrollment deposit trends for the Class of 2028 and what this portends for future recruiting cycles. To wit, consider this article released on the eve of May 1, 2024:
Financial analysts predict a difficult future for small private colleges (Higher Ed Dive)
The author shares Moody’s profile of the colleges most likely to encounter institution-threatening enrollment declines in the coming decade: private regional colleges, especially in the Northeast and Midwest, with current enrollment below 3,000, admission rates above 60 percent and with operations highly dependent on tuition and auxiliary revenue. Heed the words of William Gibson: “The future is already here; it’s just not evenly distributed.”
In The Economics of Small Colleges are Faltering, Bloomberg News reinforces Moody’s subsequent projections by outlining five factors in a December, 2023 article that together measure “operational stress” in small colleges and universities. They are:
- A high acceptance rate: over 80 percent for three years running.
- A low yield on offers of admission: three-year average below 20 percent.
- Declining enrollment: three years of a10 percent decrease in full-time students.
- Increasing institutional financial aid: rising at least 10 percent for three years.
- Persistent operating losses: for three years, excluding losses/gains from investments.
Yes, thriving or surviving, is a numbers game. But some numbers matter more than others depending on institutional context. The metrics listed above are among the critical indicators that must be managed well by colleges and universities. How to do that effectively becomes a major challenge for institutional leadership. Here we offer advice on how to build and monitor your institution’s enrollment reality so that campus stakeholders can work together to craft a strategic way forward.
Five Steps:
- Establish Your True Competitor Set
It is institutional nature to view its market position as stronger than the facts dictate and, thus, to create a competitor set that is perhaps more aspirational than realistic. Foundational to an effective enrollment strategy is to recognize your true market position and to compete more successfully against those colleges that enroll the lion’s share of your non-enrolling admits. We suggest the list not exceed ten colleges and be constructed based on a rolling 5-year matriculation analysis using admit/enrollment overlap data from the National Student Clearinghouse (NSC).
Once the baseline competitor set is established from NSC data, build out a spreadsheet that includes key admissions metrics for each institution, including your own. At the very least, these metrics should include: first-year class size, applications, admission rate, yield rate, discount rate, and US News & World Ranking (national or regional). Most of these data elements will be on the Common Data Set found on each competitor’s website. Monitoring your institution’s performance trend against this true competitor set allows leadership to objectively measure progress, stagnation or, worse, regression.
We liken the enrollment manager’s role to that of the strategic driver who views nearby traffic through the front windshield (who am I gaining on and might be able to successfully pass?), sideview mirror (who is passing me and likely to increase the volume of traffic ahead?), and rearview mirror (who is gaining on me?). Likely, your top ten competitor group can be so aligned! Understanding what your real competitors are doing and how they are performing can help you respond in ways that will improve your performance metrics.
- Create Your Institutional Enrollment Score Card
The immediate pressures of enrolling the requisite number of first-year students often takes the institution’s attention away from accounting for the performance metrics of those students they do enroll. A 2022 study by Ruffalo Noel Levitz reported that it cost a private college $2,795 (up 32 percent over 2020) to recruit an enrolled student excluding financial aid. Yet, colleges often fail to leverage that investment, and the critical tuition dollars that follow, by not strategically accounting for and addressing student retention and persistence.
Colleges with effective institutional research offices have likely developed and deployed a dashboard that tracks at least these key enrollment cohort performance metrics: first-to-second year retention, four- and six-year graduation rates, and the real-time net tuition income. However, aggregated cohort data can mask over- and under-performance by sub-cohorts (e.g., first-gen, engineers, gender, Pell grant recipients, etc.), so be sure to account for all segments that matter to you. The dashboard should include the last six entering cohorts.
This step makes you data-informed but does not produce improvement without associated action steps. Prioritize the student segments that offer the biggest return when applying the most obvious interventions. When resources-constrained, as most colleges are, the score card provides return-on-investment rationale for shifting financial and personnel allocations. For selective colleges, these data can inform the selection process; for everyone else, it will tell you how to best serve the students you must admit.
- Track Academic Program Demand
Since the onset of COVID, the media have been actively covering the accelerating rate of closures, mergers, and retrenchment of academic programs. On the latter front, West Virginia University’s planned elimination of over two dozen degree programs, along with the expected downsizing of enrollment to 21,000 in 2033 compared to actual enrollment of 31,000 in 2014, has created great angst in Morgantown and, more broadly, emboldened many other institutions to consider shuttering academic offerings that do not attract sufficient student interest.
Unfortunately, the demand for a four-year college degree has been falling and will continue to decline, more precipitously, through 2035. The primary drivers are the projected decrease of high school graduates and the likelihood that a smaller percentage of these graduates (particularly males) will continue directly to college. Also fueling the downward demand curve is the sticker price of higher education and the questioned return (value) on an expensive degree. Finally, students who do go to college have been and will continue to prefer degree programs that have a more direct link to a career.
The shift in degree demand and choice of degree has too often been viewed as a referendum on the liberal arts. Yes, the humanities and social sciences have been in steady decline for a decade or more, but the “liberal arts” has always encompassed far more. Analyzing your admission funnel by academic interest is critical. By intended major, you should be tracking 1) conversion to application, 2) admission and yield rates, and 3) financial aid discount rate. These data allow you to adjust your messaging and your outreach to students interested in major fields that have traditionally been low yielding for your institution. It could also help guide some of the awarding of financial aid to impact yield. Your enrollment scorecard should also track degree completion by major.
Obviously, with the academic program being at the core of a college’s mission, the monitoring of student enrollments by department can raise some deep concerns among faculty. But failing to align academic offerings with demand ignores a key strategy for institutional success.
- Know the Effectiveness of Your Financial Aid Spend
When supply exceeds demand, the tenets of macroeconomics prescribe reducing the supply and/or lowering price. Closures are occurring at an increasing rate but by all projections the supply of classroom seats and residence beds will outstrip demand for the coming decade. As most colleges cling to the hope that they can fill their seats and beds, they resort to deep discounting of their tuition to lower the actual price paid or, in a select number of cases where just about every student receives a scholarship or grant, colleges “reset” to a dramatically lower sticker price that, in turn, requires lower institutional aid dollars.
For the discounting strategy, colleges post high sticker prices, likely to retain the patina of high-cost equals high quality, and many students simply discard colleges based on those prices. In a 2023 NICHE survey, 53 percent of all seniors said they would not consider a school that costs more than $40,000, so colleges only see half of the available student universe. Meanwhile, they must hope students apply so they can see the actual, much lower price. Statistics bear this out: according to the College Board’s Trends in Student Pricing, after adjusting for inflation, the average net tuition and fee price paid by first-time students at private nonprofit institutions declined from $18,820 (2023 dollars) in 2006-07 to an estimated $15,910 in 2023-24. In short, the colleges, as borne out by the ever-increasing national average discount rate, are taking up the slack.
If your college’s discount rate is already north of the first-time student average of over 56 percent, it is critical to know how your financial aid is impacting enrollment and retention. Again, a dynamic dashboard should be in place to continually monitor: 1) efficacy of merit vs. need allocations, 2) impact of “gapping” on varying cohorts (i.e. not meeting financial need), and 3) retention/graduation rates by financial need and aid award bands. Often colleges fail to construct a longer-term financial aid strategy in face of immediate enrollment pressure, allowing the discount rate to creep ever closer to an unsustainable level. Know how your money is working and develop strategies to spend less but with improved results by understanding and adjusting to what your competitors are doing and identifying which programs are in demand and developing a strategic enrollment marketing plan that features career readiness goals and outcomes.
- Recognize Your Primary Market Realities
The enrollment bubble will leak or burst depending on where your college is geographically located and how its current academic programs align with student demand. Popular imagery has students flying to college or driving five hours in a packed car to begin their four-year college career. On the contrary, most college students are never very far from home. In a 2023 study, the median distance from home for students attending private nonprofit bachelors/masters institutions is only fifty-eight miles and 47 percent are within fifty miles of home.
So, for colleges, all demographics are local. If your institution is in the Northeast or Midwest, growing or sustaining your enrollment will require a herculean effort on increasing market share as your competitors will be doing the same thing. Expecting off-setting gains in secondary and tertiary markets is also daunting in the face of limited student mobility. Colleges in healthier demographic regions will still feel enrollment pressures and employ strategies to keep even more students closer to home. (Note: Nathan Grawe in his seminal study of disruption in higher education, Demographics and the Demand for Higher Education, speaks to this dynamic.
If demographics are not destiny, they are certainly real. It will require nuanced strategies to cope with those realities. Colleges cannot change the wind direction, but they can trim the institutional sails. But to do this, you must take constant readings on the demographic weather in your region. Sources like WICHE and NCES, can help you build a dashboard that tracks, among other data, high school graduation projections, proportion of those graduates going directly to college, as well as trends in short-term training and certification enrollments.
In the final analysis, success is determined by how you use the data to develop a strategic path forward. While the chief enrollment management officer (CEMO) takes the lead working together with the CFO, these two senior officers must then work with the president and provost, taking them through the data, recommending headcount and net revenue goals that are achievable and then developing a funded plan to achieve those goals.
We know that many colleges already employ these five steps with a senior level working group to develop and achieve enrollment and net revenue goals. However, we hope this serves as a helpful punch list to reinforce those efforts or to establish a data informed infrastructure that leads to improved enrollment outcomes.
Enrollment Intelligence Now, with a combined 85 years of on-campus enrollment management experience, serves as a strategic partner and trusted advisor in converting today’s steady stream of challenges into tomorrow’s success. We work with presidents, CFOs, CMOs and chief enrollment management officers (CEMOs), offering perspective, direction, and counsel when you need it: NOW. Visit https://enrollmentintelligencenow.com/ or email us at admin@enrollmentintelligencenow.com