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The Number of 18-Year-Olds is Set to Decline, Impacting Colleges and the Economy
On a recent day, pickup trucks lined the streets, their backs filled with various items, from furniture to books. People were clearing out premises as they prepared to vacate buildings that had housed an educational institution for generations.
This scene marked the end of Iowa Wesleyan University, a distinguished college that ceased operations in 2023 after facing significant financial struggles. These difficulties were partly due to the discounts offered in a bid to attract an increasingly smaller pool of students.
“When colleges close, everything that represents significant moments in people’s lives is sold to the highest bidder,” remarked Doug Moore, co-founder of a firm that has managed the closures of several institutions, including Iowa Wesleyan.
Such closures may soon be more common, as current demographic trends indicate a sharp decline in the number of 18-year-olds—those typically entering college. This so-called demographic cliff has been anticipated since the U.S. experienced a significant drop in birth rates following the Great Recession that began in 2007, a trend that remains unchanged, with a slight uptick noted post-COVID-19.
Experts predict the noticeable impact on college enrollments will begin this fall, as The Hechinger Report highlights the looming decrease in high school graduates ready to apply for college.
However, the implications of this demographic shift extend beyond academia, creating potential economic challenges as fewer college graduates will be available to fill skilled jobs, while global competitors enhance their educational attainment rates.
“The outcome of this trend is an economic downturn,” warned Jeff Strohl, director at the Georgetown University Center on Education and the Workforce.
Recent analyses from the higher education advisory firm Ruffalo Noel Levitz, utilizing the latest census information, anticipate yet another decline in the number of 18-year-olds beginning in 2033, with projections indicating a decrease of approximately 650,000 individuals, or 15 percent, by 2039.
Declining Student Enrollment Faces National Demographic Shifts
This forecast aligns with a recent report from the Western Interstate Commission for Higher Education (WICHE), which suggests the population of 18-year-olds graduating from high school each year will drop by 13 percent, representing nearly half a million students, by 2041.
“While a few hundred thousand fewer students might not seem significant, over a decade, the impact is substantial,” Strohl added.
These statistics come after a notable 15 percent overall decline in college enrollment from 2010 to 2021, as reported by the National Center for Education Statistics, equating to 2.7 million fewer students compared to a decade ago.
In the early months of 2024, colleges faced increasing shutdowns, with reports of more than one institution closing every week. New insights from the Federal Reserve Bank of Philadelphia predict that the rate of college closures could continue to rise.
Last year, twenty-one higher education institutions defaulted on municipal bonds—their principal financing source—or faced significant operational challenges. This marks a concerning increase from the 17 defaults in 2023 and far exceeds the previous five-year total of 22, indicating that the financial landscape for many colleges is deteriorating.
However, students might benefit from favorable conditions in this environment. Many colleges and universities now are admitting a greater percentage of their applicants than they did in the past decades. Additionally, tuition costs, adjusted for inflation, have seen a decrease, although housing and dining expenses continue to rise.
However, the likelihood of more college closures poses economic risks, with nearly 4 million Americans employed in higher education, according to data from the National Center for Education Statistics. While smaller institutions are often the most vulnerable, each closure results in a loss of approximately 265 jobs and $67 million annually, according to IMPLAN, an economic analysis firm.
The decline in 18-year-olds is not just a college crisis but poses broader challenges for society as a whole.
“It’s a grave issue for our nation,” stated Catharine Bond Hill, an economist and former Vassar College president, now with Ithaka S+R.
The U.S. has slipped to ninth place among developed countries regarding post-secondary educational attainment, underscoring the need for improvement. Hill emphasized the nation’s goal should be to lead, asserting, “In a workforce increasingly reliant on skilled labor, we are lagging behind.”
This reduction in young people entering the workforce could lead to “a significant labor shortage,” with projections suggesting six million fewer workers than job vacancies by 2032, according to Lightcast’s labor market analysis.
While not every job requires a college degree, a substantial number will. Projections indicate that by 2031, approximately 43 percent of new jobs will demand at least a bachelor’s degree, according to Georgetown forecasts. Major shortages are anticipated in vital fields like education and healthcare, compounded by skills deficits across 151 occupations.
“Without maintaining our innovation edge and investing in education, we risk economic regression and a potential decline in living standards,” Strohl cautioned.
An acute labor shortage is complicating growth efforts—particularly in the U.S. semiconductor sector, as noted by consultants at McKinsey & Company. This has contributed to delays in launching a new $40 billion semiconductor facility in Arizona.
This labor shortfall is unprecedented since the immediate post-World War II years when the young male demographic was significantly diminished. Presently, this shortfall coincides with an influx of retirements among seasoned professionals from the baby boomer generation.
“We’re at a remarkable juncture in our history,” Luke Jankovic, an executive VP at Lightcast, remarked. “An increasing number of individuals are transitioning from being economic producers to consumers, and there aren’t enough people to follow in their footsteps.”
Compounding the decrease in 18-year-olds are other factors, including a marked drop in workforce participation rates in the U.S.—especially among early-retired boomers and men affected by substance abuse or incarceration. The workforce participation rate for men aged 20 and above has dwindled from over 76 percent during the Great Recession to approximately 70 percent today, per the Bureau of Labor Statistics.
The negative perception surrounding the value of higher education contributes to declining enrollment rates as well. As reported by the Pew Research Center, less than 25 percent of Americans currently regard a bachelor’s degree as crucial for securing good employment.
The percentage of high school graduates transitioning directly to college has decreased from its peak of 70 percent in 2016 to 62 percent in 2022, as indicated by available statistics.
“The higher education sector is grappling with an unfavorable narrative regarding affordability and value,” stated Emily Wadhwani, a senior director at Fitch. “Restoring confidence in the sector’s worth is essential for its stability.”
The projected decline in high school graduates through 2041 is expected to hit hardest in the Northeast, Midwest, and West, with 38 states anticipated to see reductions—especially stark in states like Illinois (32 percent), California (29 percent), and New York (27 percent).
“Institutions that depend solely on the traditional undergraduate demographic for financial sustainability are likely to encounter severe challenges,” noted Scott Jeffe, research VP at Ruffalo Noel Levitz.
Contrarily, states where high school graduate rates hold steady or rise will primarily benefit from gains among Hispanic students, with their share of graduates expected to increase from 26 percent to 36 percent by 2041. However, college enrollment rates for Hispanic students have declined, as shown in U.S. Department of Education data.
All of these challenges create “an unprecedented set of circumstances” for higher education institutions, according to Wadhwani.
“This situation presents one of the most intricate challenges we’ve seen in higher education management in generations,” remarked WICHE President Demarée Michelau.
Colleges do have other potential sources of students beyond those aged 18, including international students, older populations, and graduate students.
However, relief from these other segments may not materialize as expected.
Research indicates that the number of international students dropped by 12 percent compared to competitor nations during Donald Trump’s presidency. Currently, 58 percent of European students express reduced interest in coming to the U.S. due to prevailing sentiments.
Despite ongoing recruitment efforts, the number of individuals over 25 pursuing higher education has declined by 50 percent since the Great Recession, as per estimates from the Philadelphia Fed. Furthermore, the rate of Americans aged 25 to 44 enrolled in graduate programs is on the decline, reports the education consultancy firm Encoura.
As Iowa Wesleyan University’s legacy comes to an end, its gymnasium’s flooring and other valuable components have been removed, with the cornerstone—marking its establishment in 1842—now buried in debris.
“For many towns, their identity is intricately tied to the college’s long-standing presence. It serves as a vital source of local pride and provides high-paying, irreplaceable jobs,” Moore reflected. “The impact of these closures is devastating.”
According to Moore, many more colleges may face similar fates, saying, “A staggering array of challenges confronts higher education institutions. It’s a matter of supply and demand—adaptation is essential for survival.”
This story also appeared in National Public Radio.
This story was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education, and was reviewed and distributed by Stacker.
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