Higher education enrollment: Inevitable decline or online opportunity?

By Emma Dorn, Andre Dua, Jonathan Law, and Samvitha Ram

Declines in fertility and dropping international student numbers threaten the future of many higher education institutions, but others are prospering as they adapt to serve a more diverse and adult student base, increasingly online.

This is one of a series of interactive charts that explore recent US higher education data and trends. The aim is to understand how these trends may shape leaders’ decision -making and to raise questions for further investigation. We have used publicly available data from the Integrated Postsecondary Education Data System (IPEDS), Centers for Disease Control and Prevention (CDC), Western Interstate Commission for Higher Education (WICHE), and Higher Education Demand Index (HEDI). Unless noted, we have looked at all active four-year and two-year institutions.

Higher education enrollment in the United States has been on an upswing for much of the past century, stimulating the growth of the higher education sector and contributing to American economic growth and competitiveness. Today, that growth is beginning to slow; undergraduate enrollment is predicted to decline from 2025 onwards. This article examines four trends affecting enrollment over the past decade: declining birth rates, growing racial and ethnic diversity, an increase in international students, and the rise of online and hybrid learners, including adult learners. These trends play out very differently across institutions, based on the type of institution and geography. Higher education leaders need to understand how these trends will interact in their unique context and what they must do to adapt.

Section 1

A shrinking pool of high school graduates follows a decade of falling fertility

Historically, the growth of higher education enrollment was driven primarily by a greater proportion of students attending college. However, as the portion of the population attending college has stabilized, enrollment numbers are increasingly tied to changes in population size and composition, making that demographic data a strong predictor of future college enrollment.

Declining birth rates will reduce the number of high school graduates starting in 2025.

The Great Recession of 2007–09 had an impact far beyond economics. Birth rates^* began to decline and have not recovered to pre-2007 levels since.

Birth rate

Number of births in the United States, millions

Although not all new infants go on to become high school graduates, due to a combination of migration, deaths, and school drop-outs, the trend in births is nonetheless reflected in the number of high school seniors,^* which represents the demand pool for undergraduate education.

However, not all high school graduates go onto college, and those who attend college have a range of different two-year and four-year options.

The following visualizations build upon the Higher Education Demand Index (HEDI), developed by Nathan Grawe, professor at Carlton College. HEDI models the probability of attending college and the impact of demographic changes by type of school and geography.

HEDI projections begin in 2012 and extend to 2029. They show that two-year schools will face a stark decline in overall enrollment (−13 percent since 2012), while four-year schools will see a slightly lower, but still significant, drop (−9 percent).

Enrollment at top-ranked^* schools is also set to fall, but by much less than at their two- or four-year counterparts. Even with that decline, projected to begin in 2025, top-ranked schools will still have more enrolled students in 2029 than they do today (2020).

Geography matters for most two-year and regional four-year colleges (whose enrollment will align closely with demographic trends in their region), but less so for top-ranked, four-year institutions.

This overall demographic trend of falling fertility has regional nuances. While most areas are set to see declines, some areas will see increases.

Population growth

Forecasted % change in number of 18-year-olds, 2012–29

The total number of students who will attend two-year and four-year institutions from each geography largely mirrors regional demographic trends by state or city…

… while “top-ranked”^* schools will see much less impact from these trends, drawing from enrollment pools across the nation.

Data: Nathan D. Grawe, Demographics and the Demand for Higher Education, Baltimore: Johns Hopkins University Press, 2018

Graduates

Meanwhile, graduate enrollment has also been growing over the last 15 years. However, graduate students represent a much smaller proportion of the student base.

Number of students

12-month enrollment at 4-year institutions, millions

% change from 2005

The growth in graduate enrollment is much steeper at “top-ranked”^* institutions than at other four-year institutions.

Section 2

A more ethnically diverse student body increases minority representation

Not only will the number of students attending higher education institutions change, but so will the composition of the student body. Institutions across all categories will continue to see more diversity of their student body, with fewer white students than in previous years. However, as with other findings, this trend has not, and will not, play out in the same way across institution types.

The number of students of color at many higher education institutions is growing, which mirrors demographic shifts in the US population.

U.S. demographics are shifting, with fewer white and Black 18-year-olds projected in 2028 than in 2012. During the same period, the number of Hispanic and “other” (including bi-racial) 18 year-olds is expected to rise.

“Other” includes: American Indian/Alaska native; non-Hispanic or more than one race; non-Hispanic.

Demographic forecast

Projected number of 18-year-olds by race and ethnicity, millions

% change from 2012

There may be some regional differences in these demographic trends. For example, Hispanic 18-year-olds have already surpassed white 18-year-olds as the largest ethnic group for their age in the Western region.^*

By Grawe’s projections, two-year schools’ demographics will closely mirror those of the nation, but some ethnic groups may not be as well-represented at other institutions.

At two-year institutions, the student-body composition will likely closely match that of overall U.S. demographics for 18-year-olds.

Demographic forecast

Projected racial and ethnic composition of 18-year-olds, population vs 2-year institutions, % of total

All 18‑year‑olds

nationwide

2-year

institutions

In comparison, the composition of four-year institutions will likely skew slightly higher towards white students.

The proportion of Hispanic students is smaller at 4-year institutions, but is growing over the time period.

These projections, based on Grawe’s research, become even more stark when comparing top-ranked^* institutions.

For example, Black students have historically been underrepresented and are projected to continue to be underrepresented at these top-ranked^* institutions, compared not only with overall demographics but also with their representation at other institutions.

Asian American students are overrepresented at these top-ranked^* institutions relative to overall US demographics.

Graduates

Historical data show that graduate enrollment is also becoming more diverse, though not as quickly as undergraduate enrollment. White students made up 67 percent of the domestic graduate population in 2001 but just 58 percent by 2018.

Note: “Other” graduates include American Indian, Alaska Native, more than one race, or ethnicity unknown.

Graduate-student demographics

Racial and ethnic composition of graduate students, % of total

Section 3

International students face an increasingly uncertain future

The international-student population is often at the forefront of higher education enrollment conversations. In recent years, that conversation has focused on US institutions’ reliance on international students for both enrollment and revenue growth. However, historical data show that international students account for only about 4 percent of the overall undergraduate enrollment. Notably, international-student numbers differ significantly across different types of higher education institutions.

The international-student population has been growing over the last decade, and these students are more likely to attend four-year than two-year institutions.

International students across the United States have increased by 68 percent since 2005. But growth has now stalled and may be declining as of 2018.

Number of international undergraduates

2-year and 4-year 12-month enrollments, millions

% change from 2005

The expanding pool of international students was not distributed equally among schools. International students have been flocking to four-year institutions in greater numbers, with very few attending two-year institutions.

In the last few years, the number of international graduate students at the top-ranked institutions has continued to grow rapidly, while numbers have levelled off and begun to decline at other 4-year institutions.

Graduates

International students have also been a growing segment of graduate enrollment. There were 56 percent more international graduate students in 2019 than in 2005.

Number of international graduate students

4-year 12-month enrollments, millions

% change from 2005

In the last few years, the rapid growth of international graduate students at top-ranked^* institutions has been masking slight declines in international graduate enrollment at other institutions.

Some schools may be more financially reliant on their international student base—and may face a shakier future.

While international students make up just ~4 percent of the overall undergraduate population, they pay, on average, two or three times more in tuition and fees than domestic resident students, making them an important financial base for some schools.^* Meanwhile, international students make up a much higher proportion of graduate students.

International students relative to total enrollments

12-month enrollments, international as % of total enrollment

Diving deeper on four-year institutions, we can see that dependence on international students varies significantly by Carnegie classification, as does the financial resilience to withstand any potential future drop in international enrollment. Each circle here represents a four-year institution, sized to represent the number of students and plotted to show the percentage who are international (vertical axis) and the equivalent endowment per full-time-equivalent student (horizontal axis – as a proxy for financial resilience).

Note: Only institutions with more than 1,000 full-time equivalent enrollments in 2017 are shown on the chart.

Share of international students

% of total fall enrollments in 2017, 4-year institutions, undergraduate and graduate students (log scale)

Endowment per full-time-equivalent (FTE) student

$ in 2017 (log scale)

In 2017, many Doctoral universities (commonly called ‘R1’ and ‘R2/R3’ institutions in higher education circles) had higher enrollment of international students than their non-Doctoral university peers.

Note: R1 schools are defined as “Doctoral Universities – Very high research activity”, as of the 2019 update of Carnegie classifications. R2 schools are “Doctoral Universities – High research activity”, and R3 are “Doctoral/Professional Universities”.

Approximately 56 percent of these four-year institutions had relatively low international enrollment (lower than the 4 percent average) and are thus less likely to be deeply affected if the international student influx to US institutions drops in the coming years.

A smaller number of mostly Doctoral universities (32 percent of all four-year institutions) have high international enrollment (above 4 percent), but they also have a larger financial buffer, measured here by high endowment per FTE. These universities may be hit hard by a drop in international learners, but they likely have the financial means to survive the resulting drop in revenues.

However, a group of 165 institutions (mostly R2/R3 Doctoral colleges, with some Masters colleges) are particularly vulnerable to drops in international enrollment. Not only are they heavily reliant on international enrollment, but they also may have a less secure financial base.

Note: Masters colleges are defined by the Carnegie classification as institutions that “awarded at least 50 master’s degrees in 2013–14, but fewer than 20 doctorates.”

International-student enrollment was already beginning to decline in 2018, the last year for which we have data reported by IPEDS. Even prior to COVID-19, other countries were beefing up their offerings to attract international students, potentially lowering US enrollment. International enrollment may be even more uncertain heading into 2021. The COVID-19 pandemic has dampened international student enrollment around the world, and recent US policies may discourage students from returning even when the virus recedes.

Section 4

Distance learning has surged, especially for adult learners

While overall demographic trends suggest fewer students enrolling in higher education institutions, including potentially fewer international students, there is also a shift in on-campus education. Distance learning is unquestionably on the rise, with online programs enabling more students than ever before to earn their degree either in part or entirely away from campus. Nowhere is this shift more evident than with adult learners. Both labor-market changes and increasing automation in the workforce suggest greater demand for reskilling, which could result in more adult learners looking for online or hybrid education solutions.

There has been a steady increase in both distance and hybrid learning enrollment over the last decade.

Students have been transitioning away from traditional in-person programs, while enrollments in distance learning only and hybrid learning have continued to rise steadily.

Number of students

2-year and 4-year institutions, millions

% change from 2012

2012

In 2012, distance-learning adoption varied widely at an institutional level. Each circle here represents a four-year university, sized to reflect the total undergraduate enrollment and plotted to show the proportion who studied through distance learning only (horizontal axis) or through hybrid learning (vertical axis). While some schools offer hybrid programs, uptake remains low, especially in private non-profit schools.

Note: Only institutions with more than 1,000 undergraduates in 2012 are shown on the chart.

Hybrid learning

% of undergraduates per institution, 2012

Distance learning only

% of undergraduates per institution, 2012

2018

Six years on, the surge in hybrid learning is more visible. Many universities have increased their proportion of hybrid learners in this time, while some of the largest institutions have continued to gravitate toward distance-learning-only models.

Note: Only institutions with more than 1,000 undergraduates in 2018 are shown on the chart.

The shift to distance and hybrid learning is less prominent at top-ranked^* institutions. While many of them, especially public institutions, are offering hybrid learning, few are developing a distance-learning-only option, maintaining focus on the on-campus experience.

Note: Only institutions with more than 1,000 undergraduates in 2018 are shown on the chart.

Graduates

Graduate learners have also gravitated towards distance learning and hybrid learning. Enrollment in graduate and undergraduate distance-learning programs has grown at roughly the same speed.

Number of hybrid-learning and distance-learning-only students

4-year students, millions

% change from 2012

Despite similar growth rates, graduate students are more likely than undergraduates to be enrolled in hybrid learning programs. A likely reason is the additional flexibility these programs afford—for example, the pursuit of education by full-time professionals.

Distance-learning status

Learning modality of students at 4-year institutions, %

Graduates

Undergraduates

Graduates

Some larger for-profit institutions specialize in distance-learning programs for graduates, with close to 100 percent of their graduate students enrolled in distance learning only.

Note: Only institutions with more than 500 graduates in 2018 are shown on the chart.

Hybrid learning

% of graduate students per institution, 2018

Distance learning only

% of graduates per institution, 2018

Similar to the undergraduate trend, the top-ranked institutions have relatively smaller distance-learning programs for graduate students than other four-year institutions have.

Institutions able and willing to develop new learning models are opening themselves to a vast market of prospective students, including adult learners.

Although the absolute number of adult undergraduate learners has grown over the past 15 years (a 32 percent increase), the proportion of adult learners has actually slipped somewhat, due to even faster enrollment growth in the 24-and-under age group.

Number of students enrolled, by age

4-year institutions, millions

% change from 2003

This growth, albeit tapering, may be driven by the rise of alternative learning models. Indeed, there is a slight correlation^* between the proportion of adult learners at an institution and the proportion of its students who take at least some portion of their classes online.

Note: Only institutions with more than 1,000 undergraduates in 2018 are shown on the chart.

Share of adult students

% of total undergraduate fall enrollments, 2017

Share of distance-learning only and hybrid-learning students

% of total undergraduate fall enrollments, 2018

Private for-profit universities especially seem to benefit from adult learners’ willingness and preference for online modes of learning.

As the COVID-19 pandemic causes record levels of unemployment, colleges offering online courses to adults are likely to continue to prosper.

The four trends here pose different threats and opportunities to different parts of the higher education system. Falling fertility rates are the biggest challenge for all but the top-ranked four-year colleges. It is yet to be seen if colleges can make up for this reduction in domestic high schoolers through a combination of international students and adult learners. Meanwhile, colleges also need to adapt to provide for the needs of a more diverse student base, which will likely include developing and improving different modalities of learning.

The COVID-19 pandemic is likely to further change the nature of higher education. It may accelerate some trends, such as online learning, while affecting others in uncertain ways, such as international-student enrollment.

Despite these shifting tides, one thing is clear: there is no room for complacency. Every institution will need to re-examine its enrollment and learning model to be resilient in the face of uncertainty and change.

Rising costs and stagnating completion rates:

Who is bucking the trend?

Explore the data

About the authors

Emma Dorn is the education practice manager in McKinsey’s Silicon Valley office, Andre Dua is a senior partner in the Miami office, Jonathan Law is a senior partner in the New York office, and Samvitha Ram is a consultant in the New Jersey office.

The authors wish to extend a special thanks to Arthur Bianchi and Mike Munroe for their contributions to this series of charts and analyses. Special thanks also to the data design consultancy Signal Noise for creating the article experience.

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Table of Contents

Graduates

Graduates

Graduates

2012

2018

Graduates

Graduates

Rising costs and stagnating completion rates:

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