Nathan Grawe, Carleton College – The Great Recession and Higher Education

On Carleton College Week: The Great Recession could hurt college admissions in the near future.

Nathan Grawe, professor of economics, describes how lower fertility rates can lead to lower admission rates.

Nathan is a labor economist with particular interests in how family background–from family income to number of siblings–shapes educational and employment outcomes.  Many of his works study whether access to financial resources significantly limit these important measures of success.  Nathan’s most recent publication, Demographics and The Demand for Higher Education (Johns Hopkins University Press, 2018) examines how recent demographic shifts are likely to affect demand for higher education and explores how colleges and policymakers may respond to meet institutional and national goals.  His current work studies how the taxes implicit in financial aid formulas alter female labor force participation.

The Great Recession and Higher Education

The Great Recession isn’t in the rear mirror just yet, particularly for higher education.  In response to economic uncertainty in the recession, young people began having fewer children.  In just three years, total fertility fell by almost 10%.  While unemployment recently hit new lows, fertility has not rebounded and now stands 15% below its peak.  Because children get older one year at a time, we can expect a dramatic and persistent reduction in 18 year-olds in the mid-2020s.

But what does this mean for higher education in the next decade? We can make forecasts by combining data on college attendance patterns from the Department of Education with population data at the Census Bureau.  The resulting picture is challenging.  If recent attendance patterns persist, we should expect the number of college-going students to fall by 15% in the middle of the next decade.  That’s 440,000 fewer students per birth cohort.  As if that weren’t enough, the losses will be concentrated in the northeastern quarter of the country where college demand might fall as much as 18%.

Demand isn’t expected to be soft for all institution types, however.  Children of parents with Bachelor’s degrees are more likely to attend elite schools.  Increased college attainment over recent decades means more and more children with college-educated parents.  While elite schools are still likely to experience a shrinking prospective student pool in the mid-2020s, the next half-decade or so should bring rising demand that offsets this loss.

Of course, these projections are based on the assumption that colleges and families continue behaving as in the past.  I expect—hope even—that colleges won’t continue on as if nothing has changed.  New efforts to improve retention or increase access would offset losses from the birth dearth.  And that would be a very silver lining in a demographic storm.