The Coming Enrollment Crunch

This episode of Future youe is brought to you by Deloitte's center for Higher Education Excellence, producing groundbreaking research to help colleges and universities navigate the challenges they face and reimagine how they achieve excellence. This is Future youe with Jeff Salingo and Michael Horn.

Welcome to Future youe. I'm Jeff Salingo, coming to you today from my home office in the suburbs of Washington, D.C. where I continue to be hunkered down. And along with my wife, we're homeschooling our two elementary school girls during this pandemic. I'm joined by my co host Michael Horn today over Streamyard as we try out some new remote technology. It's good to see you, Michael.

Yeah, good to be with you, Jeff. Even as we try to navigate homeschooling with our two daughters as well.

Well, you know, Michael, as COVID 19 continues to wreak havoc across America. And the majority of higher education institutions, of course, are shuttered their physical campuses through the end of the year. Summer school programs, of course, are beginning to move online, and colleges and universities are beginning to speak openly about how the current moment may impact the start of the new school year in the fall. What the impacts of that, plus the painful recession the country is now experiencing, will be on enrollment is a big question. So as part of our ongoing work here at Future youe to uncover what this might all mean for the future of higher education, we're pleased to have Pete Fritz with us today, a senior manager at Deloitte in its higher education practice, who we're going to talk with today about the impact on enrollment. Pete, it's great to have you here.

It's great to be here and I'll see your two daughters and raise you two little elementary school sons downstairs. So if you hear fighting, apologies in

advance, that's all right. I think we're going just rolling with the punches here on future you these days. So, Pete, let's start with the biggest risk right now in your mind that's facing enrollment operations kind of at the average college or university in the U.S.

yeah, unfortunately, there's a big list to choose from. I mean, when you think about things like shifting from what's traditionally a huge campus event season to virtual settings addressing admits and students, shifting financial needs, accurately modeling and predicting what enrollment outcomes are going to look like, and shifting around and then preparing for the summer, which even before COVID was ramping up to be the most competitive and chaotic because of the changes in the NATCAT guidelines, really the only silver lining out there is everyone's going through this. Although it's not much of a solace for anyone, I'd say in terms of an enrollment operations perspective, the biggest challenge really is the lack of a clear and coherent message about what's coming down the pike from the institution. And that's creating a lot of uncertainty for everyone. Right? These are functions that are facing prospects, students, families, and rightly and wrongly, admissions offices, financial aid officers are expected to have all of the answers to all of the questions. And the truth is no institution has a singular answer right now. So with so many things in flux, so many contingencies in place, I think that creates a couple big challenges for the folks really on the front lines. The first is internally helping the institution define what those contingencies are, define what those answers should be, and making sure that the enrollment admissions perspective is realistically embedded into all those plans. And then second, it's the communications themselves. You really need to walk a fine line of acknowledging the uncertainty while still instilling a confidence that A, your institution is prepared for all the various scenarios, B, the things that make your institution unique won't be compromised regardless of what happens with the crisis. And C, you're still the best option out there for your prospective and current stakeholders. And I think that really just boils down to an unprecedented amount of communication and of personalized outreach to all those populations.

So let's dive deep into then one of those segments of the population, Pete, if we might, which is, you know, because obviously colleges and universities serve a pretty diverse range of populations, particularly in this day and age. It's not the 18 to 22 year old, it's the adult learner as well. But let's focus on that quote, unquote traditional age student, that 18 to 22 year old student, where we're seeing a lot of early indications from several surveys at this point, frankly, that the high school class of 2020 might be shifting their thinking to remain closer to home, perhaps to take a gap year, perhaps to attend part time. How should colleges prepare to respond to these different scenarios? It's a more local market, there's a transfer, and then of course, more requests for deferral than they probably typically see.

Yeah, great question. And I'd say it's almost like these are questions that traditionally a lot of incoming students have had, but they're just heightened by the economic realities and really by the erosion of the value of place right now. If a big part of the value proposition of college is getting that experience away from home, and there's Good odds that we're going to be remote living in parents basements for the time being. That value proposition gets weakened pretty strongly. So I do expect a lot of those trends you mentioned to play out unless we somehow miraculously get really quick clarity about what fall semester is going to look like. And I'd add probably two elements to that. One is I don't think it will be students just considering two year options in community colleges, but also looking at some of the more well established online Educators, the ASU's in southern New Hampshires, the western governors of the world. And I'd also expect many, many students to hold onto that decision until the last possible minute in the summer. So that I think would be my first piece of advice. You know, be ready for students decisions and requests to come much later than they typically would. Expect people to change their mind as new information is coming available and expect it to be bidirectional inflows and outflows. So be clear internally about what you can and cannot accommodate and be really clear with the prospects and students about what's fungible and what sort of definitive deadlines or decision points exist. So thinking through all those things, I'd say I do think there will be an influx of students staying closer to home, especially for publics with competitive in state tuition rates. I really don't see much of that happening private to private or what I would expect to see. Private to public or out of state? Public to. In state.

Public.

Now the thing I would keep in mind there is that there's going to be push and pull in both directions. That's also going to be the best hedge for a lot of those public institutions to shore up their enrollments to look for students who are looking to come back home. So don't expect all that decision making to be driven by the students themselves. Expect a lot of competitive activity trying to actively recruit those students back. And I would say when it comes to considering either fully online programs, two year programs, even deferral years, it really is about working individually with each student and helping them truly assess their needs, the pros and cons of each situation, and guiding them to the best decision for them. It's not time for the hard sell. It's not time to try to convince prospective students that you are the only viable option. It's really about having that honest conversation. Talk to them about the quality of education. Talk to them about the ability to transfer credits back to your institution when the crisis is over. Talk to them about the overall cost for some students taking that alternative is going to make sense for others. You'll be able to identify opportunities for giving marginal aid to keep them enrolled at your university, to keep them away from the predatory providers that I'm sure are going to pop up in greater numbers because of this or prevent them from having things they haven't considered that are going to create negative impacts on them long term. So I do think either of those situations. This is the time to really put students and each individual student at the center and help them make the decision that's best for them and build that long term trust.

Pete Enrollment management is often called a mix between art and science. And in the coming months I think a lot of institutions are going to be weighing the trade offs between kind of making their enrollment goal and meeting their net tuition revenue number. Right. They hope to make both, but what's more important for them to achieve right now?

You won't believe us, but the answer is it depends.

Classic Higher Ed

I do think it's easy to say that institutions should always focus solely on their true north academic mission, their enrollment goals, but that's just not a viable reality for a lot of institutions, especially those that are facing existential threats. A colleague of mine mentioned a discussion she was having recently with an institution that said if they miss their target by 70 students this fall overall, not incoming class, that they're going to have to close their doors, not tighten their belts, not make hard decisions, not reevaluate academic programs. It was ceased to exist. That's how tight the survival line is for a lot of institutions. So in some cases it's going to have to be. Net tuition revenue is king. I do think where it gets really interesting is thinking about those institutions where it's not necessarily survival mode to that degree, but having to make the really hard trade offs between mission and financial well being. So there's no right answer out there. Obviously it's a case by case basis, just like classic higher ed. But what I would say is institutions really need to be thoughtful and intentional and pull in as many of their stakeholders as possible when they're making those trade offs and making those decisions. So have a very clear understanding and share that information throughout your institution about what is the minimal amount of net tuition revenue we need to remain viable? 2. Can any of the existing enrollment goals be modified and reset and very importantly, if they can, can we get those to realistic expectations? Right, so avoid the temptation to use financial distress as a way to back into untenable targets. We need this amount of money so therefore we have to get this many students at the same time, I think realizing that it's unprecedented times and needing to modify some of the things that have been core to a lot of institution strategies. And I think we've already started to see news trickling out about certain institutions, even really well regarded, highly ranked ones, increasing their acceptance rate, starting to prepare for needing to compete a little further down into the applicant pool to make sure that they hit their enrollment numbers. And then I think the final part of that is to say for enrollment goals that are mission based, are there ones that we need to temporarily de emphasize from a financial perspective? And I think that's the spot where quite honestly have the most concern that investments in equity and access are going to start to be de emphasized because of the crisis. And there is such an enormous long term societal impact there that if we backslide, it's going to be a huge, huge long term issue. And I hope that's something that both the institutions and probably more importantly, policymakers realize going forward.

Yeah, it's an important point. And obviously the flip side of that is the adult learner, the other side of this population that typically people say higher education is a countercyclic industry. And what they're saying often when they say that is, well, adults who are in the workforce, they're laid off, they have to reinvest in themselves, they wait out the recession, people go to grad school and so forth. As we start thinking about, you know, that adult learner and moving past the traditional student, Something Jeff and I talk a lot about on the show is that institutions are still heavily weighted sort of in their mind around the quote unquote traditional student. But thinking about that larger adult market, and you mentioned institutions like asu, Western Governor, Southern New Hampshire University, that have grown tremendously by focusing on that adult learner market. Is it an option for institutions to quickly build options for adult learners that they haven't attracted in the past or what's reality there for those institutions?

Yeah. So I think going back to that theme of uncertainty, it depends a lot about the timeline that we're talking about, how long this crisis is going to last. Unfortunately, I'd say in the short term, frankly, I'm pretty pessimistic about most institutions ability to be nimble enough to quickly pivot into those new populations that they have traditionally served. By the time you get the new programs created, all the marketing and enrollment activities designed, the supporting technology stood up, there's good odds that the world is normalizing in a lot of different ways. So I would say every institution is unique. There are opportunities for some to get into these areas in a more robust way. But for the most part, I think it's wise for most institutions that have traditionally focused on those traditional type of college students to focus their energies on how to best serve those existing students that they have, the existing constituencies that they have now. If the crisis goes long term, I think it becomes a whole different ball game. And if you start to see indications that social distancing becomes the norm through 2021 or longer, you can start to see there being adequate timelines for universities to really start to make those types of shifts. Now, the one thing I do want to say before we move on is please don't take that as me saying that it's a bad idea for institutions to get into the adult learner markets. I think that is absolutely critical for the long term health of institutions. I do think one of the things about this crisis is that it will illuminate the need for universities to have more diverse types of students and more diverse types of programmatic offerings. But I would say the idea of trying to enter into these markets as sort of a Covid crisis lifeline is a risky proposition, especially if it means diverting existing resources from your core existing students.

But it sounds like you say in the long term, they ought to be preparing for this. This goes long term, they probably have to make some small investments to start now. But they shouldn't be building revenue projections or numbers and service assumptions based on some notion that all of a sudden adult learners are going to flood to them in three months from now. Is that, is that a fair summary?

I think that's right. I think when you start getting to those situations, it's very easy to run into the temptation of forecasting your way out of your existing issues and imagining growth that might not actually be there. And at the same time, you really run the risk of taking your eye off the ball and not paying close enough attention to those students that you already have in those markets that you already do serve.

So, Pete, you know, everyone is obviously trying to design enrollment models that work in sync with pricing models for the fall, and there's really no playbook, as we know, for either. So what are some of the assumptions in your mind that schools should be working off of? In other words, you know, what kind of enrollment change should we predicting? Is it 5, 10, 15%? And probably more important, how do you price this fall if we're not back on campus as normal? I recently ran a poll on Twitter to Ask people what they think we should, what price should be. Should it be a 10% price cut? A 2010 to 20% price cut? And most actually I was kind of surprised most people said no price cut. So it seems like the expectation and probably my followers are within higher ed, so of course they don't want a price cut. But what are the enrollment projections we should be working off of? And how do you price this fall?

That is a good one. And I've had a lot of conversations around pricing and it is interesting. I think sometimes the discussions around maintaining a price point are about protecting our brand. This is the value that we represent and this, this is the true price that, that we need to charge and that people should be willing to pay. Sometimes it is that temptation of saying we need to get the books balanced. And the way we get there is by keeping tuition at existing levels. Whether or not that can realistically play out in the market. I do think we're still at a stage where there's not enough known about the fall and further where you can make any sort of definitive answers. So my first piece of advice is doing exactly what a lot of institutions are doing, which is planning for a lot of various scenarios. I was speaking recently with a controller in the SEC who was preparing eight different enrollment scenarios for the next year to present to their board maybe is a overkill, I'm not sure. But being able to plan and figure out what those contingencies are and what the different futures look like, I think is the first big part of it. That the other thing I'd say is don't plan any scenarios where pricing increases. Exactly how far we end up dropping is to be seen in terms of both, I think tuition rates and in terms of discount. Unlike a little bit like the Great Recession where we were at least able to put together some models that said what happens if we increase tuition by 2, 3, 5%? I'm imagining for pretty much every institution, the greatest growth we can possibly plan on is 0 to 1% in terms of tuition rate. The two things I think that have been coming out that I would consider as real time leading practices really are first, the idea around what's essentially option pricing. So a lot of campuses not necessarily announcing it yet, but planning on this, if we are on campus in the fall, we're going back to our standard rate or something close to it. If we are not, here's what we're planning to offer and getting ready to roll those out. And then I think pairing that with really a much greater level of personalization in terms of financial aid for students. So not doing a across the board, quote unquote Covid grant, which is probably not the best way to utilize finite resources, but understanding on a student by student, family by family basis what's going to be needed and doing our best to bridge that gap in any sort of way.

So I'm curious, Pete, so you just made some projections, talked about some potential pricing strategies there. It's not exactly great news for most of higher ed, what we've been talking about, but are there silver linings in this crisis for enrollment? I mean, ways that colleges can use the crisis to better position themselves for a post? COVID19, you see, are there strategies that you're recommending to help them be prepared to come out of this stronger? Ultimately, yeah.

I think it depends a lot on people's personal definition of silver lining. I think there's a lot of irrevocable changes coming to enrollment, enrollment management and higher education coming out of this crisis. So for those people whose ideal future is returning to the status quo, I think it's just gray skies. But I do think there are going to be some things that are going to change that can create a lot of positives for institutions and for students especially. So much more focus on being data driven. I think we've really pulled a crutch away by not being able to have in person interactions. We have access to more data because so many things are virtual. There's lower barriers to analyzing that data. And I think people are more and more are starting to see the value of that. I'd say too, the increasing digital capacities. And I think all the folks that have struggled through signing onto a Zoom meeting or navigating some out of date websites in this whole crisis are starting to see this. And I know this has been an ongoing conversation for a long time about needing to Amazonify or Facebookify higher education, and I wouldn't take it that far. But I do think people are really starting to see the challenges of how we interact digitally with our students and other stakeholders and we'll be able to improve those. The other thing I think we mentioned previously is institutions really getting religion around diversifying their student populations and the type of academic programs they provide. So I do think there will be a big shift towards the adult learner markets, towards more online learning in a really positive way. And then finally maybe bad for the institution, great for students and for access to higher education. Cost and price consciousness, I think are just going to continue trending up, if not accelerate really quickly. So all those things, I think can be seen as positives. And there's one other one I'd love to throw out there that I don't know the direction that it's going to go. But I'm fascinated to see what happens, and that's this ongoing bifurcation between the delivery of academic education and the overall experience of going to college and the pricing and the cost of those two things. So I think what we will see in the fall is a lot of institutions reducing their tuition rate, you know, very good odds that we won't be back on campus. And that in a lot of people's minds, rightly or wrongly, is going to set the floor for this is what the cost of education is. And then when we get back to a state of normalcy, we get people back on campus, institutions try and bring tuition rates up to regular levels. We'll have a lot of parents, students, legislators, really asking the question of looking at that Delta and saying, is this just the experience? And I'll be interested to see how people react to that and how institutions respond to that, because quite frankly, I. I don't think a lot of institutions have a clear answer for that question right now.

Yeah, I mean, that's a bold statement, right? Effectively, it almost forces some sort of unbundling or putting a price to different parts of what we've thought about, of the educational experience. So really appreciate, Pete, you joining us during these challenging times and shedding some light on what enrollment may look like for institutions and frankly, some of the big questions that they ought to be thinking about and modeling in different ways as we navigate uncertain and highly fluid future. So appreciate you joining us and stay safe out there.

Thank you so much, Ray, back at you and thank you for the time.

Yeah.

And we'll be right back on Future youe.

This episode is brought to you by Deloitte center for Higher Education Excellence, producing groundbreaking research to help colleges and universities navigate the challenges they face and reimagine how they achieve excellence in every aspect of the Academy. Teaching, learning and research. Through forums and immersive lab sessions, the center engages the higher education community collaboratively on a transformative journey, exploring critical topics, overcoming constraints, and expanding the limits of the art of the possible.

Welcome back to Future youe. Coming off a. I'd say a revealing conversation with Pete Fritz from Deloitte, One that had some twists and grim realities to it, frankly, given what higher ed is dealing with right now. And Jeff, enrollment is obviously highly connected to admissions and the yield models that you got to know very well while you were researching, your upcoming book comes out in August, where you were embedded in three admissions offices. As you reflect on what Pete said and the conversations that you've been having with admissions officers in the past few what's your sense of how schools are preparing And I guess a specific question. I thought his comments on pricing were super interesting. Frankly. I'm hearing some schools that say that they will have to increase prices just to keep revenue reasonable, knowing that there's going to be declines in student body no matter what they do. What's your sense of all of that right now and what are you hearing and what's jumping out to you?

Yeah, I mean, I think we heard him say particularly that net tuition revenue was going to be critical. And so I think what you might see is some small price increases in order to capture more net tuition revenue because they know they're going to have to increase financial aid as well. Recently, Michael, I took a Twitter poll which of course we all know is not exactly scientific, but I got almost 600 votes and there was still some time left in it when we're recording this episode and it's a very bifurcated audience I guess I have on Twitter because I basically asked if colleges can't reopen on time in the fall with normal on campus classes and operations, what type of price cut do you think they should offer on tuition? And the biggest proportion was no price cut and that was about 41%. But then the next biggest one was essentially people who thought we should have a bigger than 20% price cut. And then the next biggest one was 10 to 20%. Very few people said a small price cut, in other words, under, under 10%. So I think what you see is, you see, and I, I have a feeling I know my Twitter followers, right, there's people in higher ed who are basically saying probably no price cut. And then the parents who are following me and they of course want a price cut. So I think that's what we're seeing right now. And I think that's going to be the rub this fall where you see parents saying we don't want to pay, we're definitely not going to pay for increased tuition for those full payers, but we either want a lot of financial aid, which I think is going to be a struggle for colleges or universities, or we're going to want some sort of price cut. And we all know that the cost of college or what it costs to provide online education is just as much as in many cases to provide in person education. And so I think it's going to be a real struggle for colleges to do that. And so then I guess what happens is what happens to enrollment at that point, do you see kind of a mass exodus of students saying, I'm going to take the year off because my parents or I don't want to pay this, and then they'll come back? So I think that's really. Enrollment and price to me, are so linked during this period, and I think that's what institutions have to worry about. So, Michael, as you're talking to institutions, what kind of pieces of advice are you giving to students? And how about parents? When you think about your book Choosing College, are there any lessons in terms of your models that parents and students should be thinking about right now?

Yeah, look, it's a good question. One of my pieces of advice to parents and students is that you're much more in the driver's seat right now than you have been. Perhaps when I got through the. The draft of your book, actually who Gets in and why? A year inside college admissions, my takeaway was how obscured the whole process is from parents and families. But right now, I think because colleges are so desperate to get students in that parents and students really have the opportunity to choose, you know, and to have individual conversations, in some cases with admissions officers because they really want to make sure that you show up. And so the amount of empathy and individualized attention I think that they're willing to give is more than in normal years because each student represents found revenue against fixed costs. To your point about online education, it's not that online education has to be the same price, but when you're offering it with all the fixed costs of the university, it's covering those costs right now. Right. So, number one, I'm telling parents you're more in the driver's seat than you think you are, and step back and use that power to get the best deal you can that fits your particular circumstance. The second thing that jumps out to me is we obviously found five different jobs to be done. Two of them, I think, are really tricky in this environment. So help me get into my best school, which is all about the trappings of the college experience we've sold people. How do you do that when it's online and create this prestigious environment? Online has been all about access, affordability, convenience, not prestige. And help me reinvent myself with new people and things of that nature. And then the second one is help me get away, like I'm running from my hometown, and college is my escape. Well, now you're still in your basement. As Pete was saying. How do you innovate against that in an online environment? I think is incredibly tricky. It's I think frankly an opportunity on both for innovators to come in and offer a really compelling experience that differentiates on price. But I think it's tricky. And from my perspective this maybe gets into the, I don't know how many billion dollar question it is, but you know, you're on the hot seat right, right now. And let me ask you, what do you think is going to happen to fall enrollment? Like let's just think 18 to 22 year old students right now and accept the adult learners because I think that is its own equation. But thinking about that 18 year old matriculating to campus, what do you think is going to happen in terms of enrollment and revenue?

Well, I think that if we're back on campus in any sort of normal semester, I think you're going to see a smaller drop off, obviously probably a couple of percentage points. I think that at institutions that are not normally online institutions in any big way. So I think this is different for the southern New Hampshires of the world, different for the ASUS of the world, different for Penn State which has world campus or University of Maryland with their global campus. They have experience. I think they're going to grow. And I also think that even the residential students will be continuing to go back there because they have access to pretty good online courses. I think at the rest of the institutions, which is the majority of higher education, I think we can see drop offs in enrollment of 10 to 15% and I think it might even be bigger among the incoming freshman class. So I just think that's the worst case scenario that institutions should plan for. What do you think, Michael?

I'm similar. I've had sort of 10% enrollment drop is the number in my head, 20% drop in revenue. I think, you know, just because I think there's going to be far fewer students able to pay what they were and able to pay. And you know, I worry a lot about the vicious circle in all this, Jeff, which is to say that students, excuse me, institutions will have less financial aid dollars potentially to give out. Students have less budgets to be able to afford. Fewer students come that actually hits financial aid budgets even harder, which then have less money to give out. And it sort of creates this circ whereby you could end up with a lot less students with a lot less revenue coming in. Once you've run around that iterative circle a couple times unless you're able, obviously, as you said, to create a compelling campus plan sooner rather than later, I think.

Well, Michael, that's a wrap for today's episode. So thanks everyone, for joining us on this episode of Future youe. And a real big thanks to Pete Fritz from Deloitte for joining us as well. We're going to be back with more episodes uncovering the different dimensions of this crisis and its impact on the future of higher education soon. So be safe and stay strong, everybody. Hey, folks, Michael Horn here.

Hope you enjoyed the latest episode of Future youe. And just a reminder to please subscribe to us on your favorite podcast platform. And if you like the podcast, rate us so that others can find us and find out about the good conversations that we're having here. As always, thanks so much for listening.