Higher Ed’s Reckoning with Relevance: Preview of EAB’s State of the Sector

Higher education is facing a moment of reckoning, where students, faculty and staff, and society as a whole re-examine its purpose and value. In particular, the national conversation is questioning the relevance of colleges and universities like never before. Simultaneously, we face declines in demographics, college-going rates, and student mental health that pose dangers to our mission and business model.

To help distill all of this information, EAB has organized this year’s State of the Sector address around the six key trends most shaping the operational direction of colleges and universities. These are priorities each institution must address to meet the challenges of the moment and ensure their relevance in the years and decades to come.

1. Public Perception of Higher Ed Value

We’ve all heard the national narratives about higher ed’s declining ROI, spiraling student costs, and link to lifelong debt – but the truth is most of these claims do not stand up to scrutiny. Nevertheless, repetition of these narratives – true or not – creates an “echo chamber” effect that is dissuading on-the-fence students and families and exacerbating higher ed non-consumption. Moreover, this echo chamber is impacting how boards, local stakeholders, and even university employees are thinking about higher education. But rather than attempting to “tell our story better” nationally, universities’ time and energy are better spent focusing more locally on targeted messaging and programs for critical student subsegments and local education, industry, and government partners.

Attract today’s skeptical student with a differentiated value proposition

2. Enrollment and Demographics

While we’ve seen a stabilization in enrollment since the pandemic, it’s crucial to recognize that we’re not yet back to “normal.” The undergrad flight to size and selectivity continues, leaving most institutions grappling with noticeable declines. On the horizon, the much-discussed “demographic cliff” is just the beginning.  By 2060, the United States population will peak, wherein the total population will reach a maximum before steadily declining. After this peak, the U.S. can anticipate an 8 percent decline by 2100, meaning a reduction in the number of students across the board.

Beyond enrollment, this demographic change will impact government funding and the labor market, representing both opportunities and challenges for higher education institutions. Navigating this evolving landscape requires a strategic approach that goes beyond mere enrollment numbers and considers the broader socio-demographic shifts shaping the future of education.

How to rightsize your university to combat the looming demographic cliffs

3. Sustainable Business Models

The combination of enrollment shortfalls, inflation, and rising wages is creating considerable budgetary strains on most institutions. Even some campuses currently in a financially favorable position are proactively seeking cost-saving measures to brace for an oncoming storm. In the short term, university leaders must avoid damaging one-time, across-the-board cuts, opting instead for sustainable and principled savings tactics. However, declining demographics mean that for most universities, this is not a storm to weather, but an existential change.

Rather than continuing to try to “do more with less,” many should be pursuing a “less with less” strategy of strategically shrinking—reduced footprint, fewer offerings, fewer students—to become leaner and more resilient.

How one institution saved millions without cutting faculty or programs

4. Student Readiness and Well-being

Student mental well-being and academic achievement are closely intertwined, with academic struggles leading to greater stress, and greater stress leading to difficulty studying. Declining mental health is a well-known and growing challenge, impacting universities in tangible ways. The aftermath of K12’s unfinished learning due to emergency remote instruction is seen by higher absenteeism, spiking DFW rates, and greater student demand for academic accommodation.

What’s particularly noteworthy is that this dual challenge will get worse before it gets better. The largest drops in test scores occurred with current 8th and 9th graders—students who will arrive at university in four to five years. Universities need to prepare now to support their least academically prepared cohort in only a few years.

Support student mental health and well-being on your campus

5. Hybrid Campus

The buzz around “return to the office” in the corporate world has been overstated, and higher ed remains an outlier on hybrid work norms. While concerns about the negative impact on campus culture or the student experience are principled, forward-thinking organizations have shown that you can maintain culture with intentional management structures and strategic use of in-person time. Universities open to incorporating elements of a hybrid model stand to benefit in hiring, retention, operations, and productivity.

More fundamentally, almost regardless of your hybrid policy, most universities now have too much space and the wrong mix of space, given changes in work and student preferences.

Get guidance on how to implement an effective flexible work strategy

6. Artificial Intelligence

Artificial intelligence (AI) technology reached a turning point in late 2022, marked by the launch of ChatGPT, which hit 100 million users in an astonishingly fast two months. Initial reactions among university leaders centered on academic integrity and potential cheating issues. However, most quickly recognized that the “genie was out of the bottle” and redirected their focus toward effectively integrating AI into pedagogy. In the short term, investments in just-in-time (JIT) training and short-format modules for students and faculty show promise.

On a more profound level, universities must adjust teaching and learning to prepare students for a post-AI world, as well as consider AI applications in student success, staff and faculty productivity, and research.

How to embrace AI in higher ed

Ready to dive deeper into these topics?

EAB’s State of the Sector  address shares in-depth insights into how these factors are shaping higher education and what you need to do about it. Following the presentation, we will hear from a panel of industry experts for reactions and discussion on how these key forces are shaping the industry.