Navigating Declining Enrollment and Shifting Demands
New colleges to address community needs starting to emerge
Robin Capehart
Jun 9
The landscape of higher education is on the brink of significant transformation. Over the next 15 years, college enrollment is projected to decline due to multiple factors, including shifting demographics, growing skepticism about the value of a traditional college degree, and the evolving demands of the workforce.
This decline, as well as the changes in public and employer expectations, presents challenges and opportunities for colleges and universities to rethink their purpose and adapt to a rapidly changing educational ecosystem.
This trend has significant implications for higher education institutions (HEIs)—particularly liberal arts colleges. Nevertheless, there are the strategies colleges can adopt to remain relevant and sustainable in this new era. We would offer a roadmap for college presidents to navigate the challenges ahead. By embracing innovation and focusing on student and workforce needs, higher education institutions can remain essential contributors to society and the economy.
Reasons for Declining Enrollment
Primarily, there are three dominant reasons for the decline in college enrollment:
1. Demographic Shifts
A decline in the number of college-aged students is one of the primary drivers of decreasing enrollment. Birth rates in the United States have been steadily falling since the Great Recession of 2008, with the National Center for Education Statistics (NCES) projecting a nearly 15% drop in the number of high school graduates between 2025 and 2037 (Grawe, 2018). This “enrollment cliff” is already beginning to impact colleges, especially those with smaller endowments or regional appeal.
2. Skepticism Toward the Value of College Degrees
Increasingly, parents and students are questioning whether the cost of a college degree is worth the return on investment. Rising tuition costs over the past two decades have resulted in unprecedented levels of student debt, with the Federal Reserve estimating that Americans owe $1.77 trillion in student loans as of 2023. Meanwhile, employers are increasingly valuing skills over credentials, with companies like Google, IBM, and Accenture eliminating degree requirements for many positions (Pew Research Center, 2022).
3. Shift in Employer Expectations
Employers are moving away from requiring traditional four-year degrees and are investing in in-house training programs or partnerships with alternative education providers. According to the Burning Glass Institute (2022), “skill-based hiring” has risen by 63% over the last decade. This trend reflects a broader movement toward micro-credentials, certifications, and other non-degree pathways that provide targeted skills and faster entry into the workforce.
CHALLENGES FOR LIBERAL ARTS COLLEGES
Enrollment and Closure Trends
The decline in liberal arts college enrollment represents a broader crisis in this sector of higher education. According to the National Student Clearinghouse Research Center, enrollment at liberal arts colleges fell by 14% between 2015 and 2021, a sharp contrast to the 7% decline across all institutions (National Student Clearinghouse, 2021).
This decline has had severe consequences, particularly for smaller institutions. For instance, in 2024, ten US colleges closed their doors, including the University of St. Katherine, Wells College, the College of St. Rose, Birmingham-Southern College, St. John’s University (Staten Island), Hodges University, Lincoln Christian University, Magdalen College of the Liberal Arts and Clarks Summit University.
Additionally, two more colleges, Eastern Nazarene College and Fontbonne University, are on the brink of closure in 2025.
For a full list of closures and mergers, see https://www.bestcolleges.com/research/closed-colleges-list-statistics-major-closures/.
In December 2024, the Federal Reserve Bank of Philadelphia reported that fiscal challenges and an enrollment cliff are the strongest predictors of a college’s closure.
Financial Vulnerability
The financial metrics of liberal arts colleges reveal their increasing vulnerability. While elite liberal arts colleges maintain robust endowments—averaging $1.12 million per student for the top 10 institutions—most liberal arts colleges operate with significantly smaller financial cushions (Council for Aid to Education, 2022).
For example, institutions ranked 50-100 average only $263,000 per student in endowment funds (Council for Aid to Education, 2022). The financial strain is further evidenced by the fact that 50% of rated private universities reported operating deficits in fiscal 2023 (Moody’s Investors Service, 2023).
Student and Parent Preferences
The shift away from liberal arts education is strongly reflected in student and parent preferences. A survey indicated that nearly 60% of high school seniors believe a liberal arts education can be obtained at any type of institution, undermining the unique value proposition of dedicated liberal arts colleges (Art & Science Group, 2022). Furthermore, only 12% of students express a preference for a purely liberal arts education, while 60% favor more applied and career-specific programs (Gates Foundation, 2023).
According to a study conducted by the Gates Foundation, students view job training and certification programs as more valuable than traditional degrees (Gates Foundation, 2023).
Employment Outcomes
The skepticism toward liberal arts education is partially justified by employment data. Research shows that only 55% of liberal arts graduates secure full-time employment compared to 73% for STEM graduates (Burning Glass Technologies, 2022). While bachelor’s degree holders average $61,000 annually over their careers, liberal arts graduates tend to start with lower salaries (Pew Research Center, 2022). The earnings gap between liberal arts and other majors widens 16-20 years after high school (National Center for Education Statistics, 2023).
Market Supply and Demand Imbalance
The current market dynamics reveal a significant mismatch between supply and demand. The average enrollment at liberal arts institutions is approximately 2,086 students, indicating their relatively small scale (National Center for Education Statistics, 2023). The market operates in a perfectly competitive manner, with factors such as student quantity, costs, test scores, and rankings influencing tuition rates. Since 2020, nearly 48,000 students have been affected by private nonprofit college closures, indicating the scale of the sector’s contraction (Chronicle of Higher Education, 2023).
Future Outlook
The situation is likely to worsen due to demographic trends. Experts predict a significant “enrollment cliff” around this year due to declining numbers of college-age students (Brown, 2023). Undergraduate enrollment has already fallen by almost 15% between 2010 and 2022 (National Student Clearinghouse, 2022). Additionally, the number of Title IV institutions eligible for federal financial aid decreased by 1.7% in the 2023-24 academic year (U.S. Department of Education, 2023).
OPPORTUNITIES FOR GROWTH AND ADAPTATION
Despite these challenges, there is substantial opportunity for higher education institutions to pivot and meet the changing needs of students and employers. Colleges that embrace these shifts will not only survive but thrive in this new educational ecosystem. Below are strategies colleges can adopt:
1. Embrace Stackable Credentials
The concept of stackable credentials allows students to earn smaller, career-focused certifications that build toward a larger degree or skill set. For example, a student might complete a six-month certification in data analytics, which could later be “stacked” toward an associate degree or bachelor’s degree in business. This approach aligns with the needs of adult learners and career-changers, who may not have the time or resources to commit to a full four-year program. Institutions like Southern New Hampshire University and Western Governors University have successfully implemented such models.
2. Develop Career Pathways
Colleges should consider restructuring programs to focus on career pathways. This involves aligning degrees and coursework with specific industries and job markets, ensuring that graduates are well-prepared for employment. Partnerships with local businesses, apprenticeship programs, and co-op opportunities can enhance the relevance of these programs. Community colleges have been leaders in this space, with programs that lead directly to in-demand jobs in fields such as healthcare, technology, and skilled trades.
3. Integrate General Education with Career Skills
While the liberal arts curriculum should not be entirely abandoned, it must evolve to better align with career outcomes. For example, general education courses in communication, ethics, and problem-solving can be directly tied to practical applications in the workplace. Institutions like Arizona State University have successfully blended traditional liberal arts education with career-focused programs, offering students the best of both worlds.
4. Expand Access to Non-Traditional Learners
The future of higher education lies in serving non-traditional students, including adult learners, part-time students, and career-changers. According to the Lumina Foundation (2023), 36 million Americans have some college credit but no degree. Providing flexible, affordable, and online options will be critical in attracting this population.
5. Focus on Affordability
Rising tuition costs remain a significant barrier for many students. Institutions that can lower costs through innovative delivery models, partnerships, and operational efficiencies will be more likely to attract students. For example, Purdue University’s partnership with online education provider Kaplan has allowed the institution to offer affordable degree programs at scale.
A ROLE FOR NEW INSTITUTIONS
If traditional colleges and universities fail to adapt to shifting workforce demands and evolving student preferences, new institutions will inevitably emerge to fill the void, prioritizing career pathways and innovative approaches to education. These institutions are likely to focus on programs that are shorter, more affordable, and tightly aligned with industry needs, offering an alternative to the traditional four-year degree model.
Unlike conventional higher education models, which often emphasize broad, generalized education, these new institutions will aim to bridge the gap between education and employment, preparing students directly for high-demand careers in fields such as healthcare, engineering, business, and education.
In addition to offering streamlined programs, these institutions may integrate cutting-edge technologies like AI-driven personalized learning, which can adapt to the specific needs of each student and enhance educational outcomes. By tailoring content delivery, identifying areas for improvement, and offering targeted skill development, these technologies can help students master the practical competencies required in their chosen fields while avoiding unnecessary coursework.
Importantly, as the online education space becomes increasingly crowded and less viable for career-focused training in certain fields, emerging institutions will need to prioritize hands-on, in-person education models that better align with the demands of careers requiring practical experience, such as nursing, mechanical engineering, and early childhood education.
This emphasis on experiential learning and face-to-face instruction will distinguish these institutions from the growing number of purely online programs, which often fall short in preparing students for the realities of such professions.
Examples of Emerging Institutions and Initiatives
One compelling example of this trend is the University of Austin, a recently established institution that seeks to reimagine higher education. The University of Austin emphasizes intellectual rigor, free inquiry, and a return to foundational educational principles, while also addressing workforce needs through practical, skills-based programs.
By blending the liberal arts tradition with career-oriented training, the University of Austin is positioning itself as a forward-thinking institution that respects the value of broad-based education while adapting to the realities of the modern job market.
Unlike many traditional universities, which are often slow to respond to economic and labor market shifts, newer institutions like the University of Austin are designed with agility in mind. Their programs can be rapidly developed and adapted to match emerging trends in the workforce, ensuring that graduates are prepared to meet the demands of industries such as healthcare, engineering, and business management. These institutions are also less constrained by entrenched bureaucratic systems, giving them the flexibility to experiment with innovative curricula.
Additionally, smaller institutions or startups are beginning to reimagine the traditional campus model by creating specialized academies or regional training hubs. For example, medical and healthcare academies that focus on preparing students for careers as nursing assistants, physical therapy aides, or medical technicians are being integrated into existing hospital systems or healthcare providers.
These institutions emphasize intensive, hands-on training, which is critical in fields where practical experience is essential. Similarly, engineering academies are being established in collaboration with local industries to provide students with exposure to real-world projects while they learn.
Focus on Affordability and Accessibility
Emerging institutions will also prioritize affordability and accessibility, recognizing that the high cost of traditional education has become a significant barrier for many students. Instead of relying on expensive tuition models, they may adopt modular learning structures, where students pay only for the specific skills or certifications they need. These modular programs could allow students to stack credentials over time, building toward a degree or advanced certification without the financial burden of committing to a full bachelor’s program upfront.
In addition, partnerships with industries will likely play a significant role in reducing costs for students. For example, companies might sponsor programs or provide funding for specialized training in exchange for a pipeline of well-prepared graduates.
Apprenticeship-style models, where students alternate between classroom instruction and paid work experience, are already gaining traction and could become a cornerstone of these new institutions. These programs offer students the dual benefit of earning an income while gaining the skills and experience necessary for their careers.
The Role of Industry Partnerships
To ensure their programs are aligned with workforce needs, emerging institutions will likely form close partnerships with employers and industry leaders. These collaborations could include co-designing curricula, providing internships and apprenticeships, and even guaranteeing job placements for graduates. Such partnerships are already being implemented in certain fields, but new institutions could take them further by embedding them directly into their operational model.
For example:
Healthcare institutions might partner with universities to train nursing and healthcare professionals through hospital-based education hubs.
Manufacturing and engineering firms could collaborate with technical academies to provide students with access to cutting-edge tools and real-world projects.
Business schools may work with major corporations to create leadership development programs tailored to the needs of specific industries.
By fostering these partnerships, emerging institutions can ensure that their graduates are not only job-ready but also sought after by employers, creating a tangible return on investment for students.
AND SO . . .
The higher education sector is undergoing a profound transformation. Declining demographics, growing skepticism about the value of a college degree, and changing workforce demands are all driving institutions to rethink their missions. For liberal arts colleges in particular, this moment represents both a challenge and an opportunity.
Institutions that embrace stackable credentials, career pathways, and practical general education will be well-positioned to meet the needs of a changing student population. By adapting to these trends, colleges can ensure not only their survival but their continued relevance in an evolving educational and economic landscape.
Moreover, as traditional colleges and universities struggle to keep pace with changing workforce demands, new, career-focused institutions are poised to step in and fill the gap. These institutions will prioritize shorter, more affordable programs, hands-on learning, and innovative technologies while maintaining a strong emphasis on practical, in-person education.
By forming strategic partnerships with industry leaders and focusing on high-demand fields such as healthcare, engineering, business, and education, these institutions will provide students with the skills and experience they need to succeed in the modern job market. In doing so, they will not only transform the higher education landscape but also help address critical workforce shortages in key sectors.