Ramstad: The financial aid crisis has ended, but market is shrinking for Minnesota colleges

NORTHFIELD — College is back in session across Minnesota except at Carleton College, where the fall semester begins next week.

Everyone in business should keep an eye on schools and colleges because they show where the American economy is going. The number of births peaked in 2007 and, with the exception of a couple of years, has declined steadily since then. Last year, there were 17% fewer babies born in the U.S. than in 2007.

Nathan Grawe, a Carleton economics professor, has published two books on the effect declining births will have on higher education. College matriculation rates started to suffer after the 2008 recession and Grawe determined that by the mid-2020s, that would combine with declining births to spell trouble for higher ed. On top of that came the pandemic.

“We’d been declining for awhile going into the pandemic, and the rebound hasn’t gotten us back to [the levels] before the pandemic,” Grawe said. “Matriculation rates are really, truly down. Not as many high school graduates are choosing college, and I think that speaks to the labor market.”

Perceptions about the value of higher education changed as labor became less abundant. Unemployment, with the exception of the pandemic year, has been under 5% nationally since 2016. The exit of the baby boomers into retirement has created more labor scarcity. Meanwhile, wages have risen sharply at the lower end of the job market while staying relatively flat at the top end.

“It is changing the actual return. College still remains for most students a good investment,” Grawe said. “But I understand why more people are asking ‘Is college worth it in general? Is it worth it for my kid?’”

Also, politicians of all stripes started to beat up on higher education in recent years. Republicans say colleges are too liberal and woke and Democrats say they are too expensive. “Both of them seem to be concerned about return on investment,” Grawe said.

Meanwhile, women now outnumber men in four-year colleges by a larger amount than men outnumbered women in the early 1970s, when the federal Title IX law took effect to bring gender balance to higher education. The mismatch exacerbates the overall enrollment pressure.

“The curious thing has been that the gender divide has been so pronounced for so long and gone unnoted,” Grawe said. “Recently there’s been a willingness to recognize something’s going on that we need to change. Don’t discourage women, but encourage men at the same rate as women.”

When the overall number of high school graduates starts to shrink, which could be next year or 2026, colleges will be engaged in a zero-sum fight for students. Grawe encourages administrators to focus more heavily on retention; many colleges lose 20% or more of the students they enroll in the first year.

“We have to start addressing the back door: students who come to our campuses and, within nine months, decided I’m never coming back,” he said.

For schools like Carleton that have been excellent for decades and admit a small fraction of applicants, the coming era of fewer prospective students poses less challenge. They can simply admit more from their deep pools of candidates.

Schools that are less selective, or that have historically relied on attracting students from a geographic region that may now be declining, face more difficulty.

Enrollment this year worked out more smoothly than administrators expected when the federal government’s financial aid system glitched this past winter and spring. That delayed need assessments and aid offers to students and families across the country.

The state’s largest school, the University of Minnesota’s Twin Cities campus, delayed student acceptance decisions from May 1 to May 15. A few weeks ago, 7,300 first-year students entered the U, preliminary data shows. That’s a 9% increase over the last couple of years. “We worked with individual students to support them if there were additional delays,” said Keri Risic, executive director of the office of admissions.

The Minnesota State system is likely to report a “slight but consistent increase” in students when its official count is done later this month, said Paul Shepherd, associate vice chancellor for student affairs and enrollment management. He credits incentives like the North Star Promise, the program Minnesota legislators passed last year that offers free tuition to Minnesota’s public and tribal colleges to families with adjusted gross income under $80,000.

“There’s been a lot of investment to make college more accessible,” he told me. Minnesota State experienced significant enrollment declines over the last decade, Jenny Berg reported in Sunday’s Star Tribune.

Gustavus Adolphus College in St. Peter enrolled 520 students this fall, up from 519 a year ago, said Kim Frisch, vice president for enrollment management. In light of the financial aid problem and the North Star Promise incentive that puts private schools like Gustavus at a disadvantage, Frisch said, “I’ll take flat [growth] as a win.”