America’s colleges and universities are under duress. At least 76 public or nonprofit colleges have closed or merged since March 2020, and some experts believe more are on the way.
A big reason for this trend is the “enrollment cliff.” This year, the number of high school graduates will peak at around 3.9 million and then begin a gradual descent that will result in about 13% fewer by 2041.
In response, many institutions of higher learning have recruited students from overseas to backfill the declining domestic enrollments. In the 2023-24 academic year, a record number of international students attended U.S. colleges and universities, marking a 7% increase from the previous year. Altogether, international student enrollment contributed $43.8 billion to the U.S. economy last year.
However, despite the Trump Administration’s decision to restore the visas of thousands of international students, which they initially revoked, many foreign students are reconsidering their plans to study in the U.S. A number of countries are now encouraging their nationals to attend college anywhere but in America. For example, on April 9, China’s Education Ministry advised students to thoroughly assess risks when considering studying in the U.S.
May 1 was college decision day, so the data on how many international students decide to matriculate at U.S. institutions of higher education is still unknown. But one media outlet has stated that they are seeing a 30% drop in student visas to Indians, who make up the largest contingent of international students in the U.S. And anecdotally, admissions offices around the country are nervous, because even small declines in enrollment levels will a serious impact on those schools that are tuition dependent.
While private schools rely heavily on tuition revenue from foreign students, so too do a growing number of public universities. For example, in 7 out of the 10 most populous U.S. states, public universities were the biggest economic beneficiaries (tuition and cost of living expenditures) from the enrollment of foreign students according to a study by NAFSA.
- California – USC ($880 million)
- Texas – University of Texas at Dallas ($277 million)
- Florida – University of South Florida ($196 million)
- New York – New York University ($1.4 billion)
- Pennsylvania – Penn State ($411 million)
- Illinois – University of Illinois ($567 million)
- Ohio – Ohio State ($306 million)
- Georgia – Georgia Institute of Technology ($250 million)
- North Carolina – Duke University ($318 million)
- Michigan – University of Michigan ($547 million)
Community colleges also rely heavily on revenue from international student tuition. According to the same NASPAA study, foreign students at U.S. community colleges contribute $2 billion annually to their schools’ revenue stream.
If there is a drop-off in the number of international students, what would be the impact on colleges and universities? Last December, the Federal Reserve Bank of Philadelphia issued a paper that projected two possible scenarios for school closures. The best-case scenario (the enrollment cliff would take effect more slowly over the next five years), estimated about 4 to 5 school closures would occur annually through 2029. The second scenario is more pessimistic. It assumes the downturn from the enrollment cliff happens more suddenly, perhaps exacerbated by additional factors, such as an unexpected decline in international applicants. Under this scenario as many as 80 schools could shut their doors by the end of this decade. Given the recent events around visa revocation for foreign students, the latter scenario seems increasingly likely.
Typically, when faced with budget shortfalls, college and university presidents look for alternative sources of revenue, such as creating new graduate programs, offering online degrees, or creating alternative professional credentials. Given growing interest in apprenticeship programs, there may be an opportunity for schools, particularly community colleges, to offer apprenticeship degrees in technical fields such as artificial intelligence or cybersecurity. In Germany, apprenticeship programs now represent half of all incoming undergraduates, and involve students learning in both the classroom and on the job.
But ultimately, schools cannot simply grow their way out of this new demographic reality. Eventually, they are going to have to tighten their belts. This means slimming down career and other student services, clubs, athletic programs, and administrative positions overall. It will also necessitate higher course loads for faculty, a shift from lifetime tenure to long-term contracts of 5 to 10 years, and the postponement of new building construction. These are going to be tough choices, and faculty, students, and administrative employees will resist. But if schools are not proactive, demographic reality will make the choice for them.