Inceptia_NavigatingtheEvolvingLandscape RB_062024

RESEARCH BRIEF

Navigating the Evolving Landscape: Strategies for Overcoming Challenges in Higher Education Support

Sue Downing Senior Vice President & Officer

December 2023

Overview

The effects of the COVID-19 pandemic are still playing out in society at large and on college campuses. Some impacts are immediately apparent; others take time to fully manifest themselves.

This research brief addresses four areas of concern – four challenges – that are faced by higher education institutions today and may have been aggravated by the events of the last several years. They range from costs, to enrollment, to the long-term viability of the institutions themselves, to how well financial aid departments are managing to address changing circumstances with constrained resources. These challenges will not be news to higher education administrators. But a view of recent research and current statistics may help provide additional perspective on fashioning approaches for the future. In the area of financial aid administration, enrollment management and admissions, that future may very well include a reliance on third-party partnerships to effect better educational and financial outcomes for students.

Challenge #1: Rising Costs The escalating cost of higher education is certainly one of the worst kept secrets in the field, but Forbes notes that data from a report by the National Center for Education Statistics puts a hard edge on this reality. In 1980, the total annual cost of attending a four-year college full-time was $10,231 (an inflation adjusted figure). That included all tuition, fees, room and board. By the 2019-20 academic year, the price increased to $28,775 – a 180% increase over four decades. 1

In analyzing these figures, Forbes points to three factors that lead to rising higher education costs:

• The need for additional student support services to encourage better educational outcomes • Reductions in state and local funding in some places, which shift more costs onto students • The overall increase in costs for service industries generally That last point, as discussed by Forbes, has perhaps the deepest impact. Education isn’t exactly like any other industry, where the overall “per-unit” cost can be kept in check through productivity gains using robotics, computer software or logistics refinement. At least, education can’t be delivered “quicker, better, cheaper” and still maintain the same kind of full-fledged academic experience students say they want. Some may argue that education is just its own, special category, and cost escalation is just an acceptable part of the equation. As a plaque in more than one college financial aid office reads, “If you think education is expensive, try ignorance.” Still, when we compare the rising price tag for one year at college against inflation in the economy generally, we begin to understand the sticker shock felt by students and families. The graph on the next page tells the story. 2

College Tuition & Fees vs. Overall Inflation (CPI-U) Cumulative Inflation Comparison 1979 - September 2021

1400.00%

1323.52%

1200.00%

1000.00%

College Education Cumulative Inflation

800.00%

600.00%

400.00%

301.63%

200.00%

Overall Consumer Prices (CPI-U)

0.00%

This inflation disparity has not gone unnoticed – especially since, according to research by the Economic Policy Institute, middle-class wages have been stagnant over the same period of time, despite large increases in economic productivity. 3 To make up the funding gap, students and families have turned to borrowing, which college financial aid offices help facilitate. But attitudes are changing about taking on student debt and the prospect of paying it back. According to statistics from the Education Data Initiative, more than 43 million borrowers have student loan debt totaling $1.774 trillion – a record high – and more than 92 percent of that comes from federal loans. The average federal student loan balance is $37,717. 4 A survey by Trellis Company suggests rising feelings of stress, anxiety and even despair among student loan borrowers, with 62 percent of respondents saying they have more debt than expected, that the total is unmanageable and that they doubt any portion of their debt will be forgiven. 5 2009 Note: Data are for institutions that grant associate degrees or higher in the 50 states and the District of Columbia that participate in Title IV federal financial-aid programs. Source: National Center for Education Statistics 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0 6M 12M 18M

9,000,000

If students are souring on borrowing, how to bridge the funding gap?

Financial aid professionals at colleges and universities have worked hard to make higher education more affordable through self-funded grants, fellowships and scholarships. This “discount rate” has been growing in value to both incoming students and returning students. 8,000,000 8.25.2023 8,500,000

2021

2026

2016

In a National Association of College and University Business Officers (NACUBO) study of 359 private,

Source: Higher Ed HR Magazine , CUPA-HR Forecasted data from Higher Education Demand Index (Grawe, 2016)

Public Four-Year

Nonprofit Two-Year

nonprofit colleges and universities, the institutions reported a 54.5 percent average tuition discount rate for first-year students in 2021-22, and a 49 percent discount for all undergraduates. Both of those figures are record highs. In 2023, the discount rate for first-year undergraduates hit another new high – 56.2 percent. So, a student may ask, what’s the real price? An article on the Inside Higher Ed website notes that, while the discounts communicate to students that financial aid is available, they also signal that pricing is arbitrary. 6 And even a discounted price is out of reach for many students and their families, and they will look for cheaper alternatives for education and job training. Takeaways: The inflation rate in higher education outpaces that of virtually any other sector of the economy, including healthcare. Just as with other services, such as cable television, there is a cost limit past which most consumers will not go to pursue an education. Finding a way to reduce the actual cost of schooling remains the holy grail for colleges and universities. Borrowing large amounts of money for education, based on the promise of higher future earning power, is being viewed more dubiously by students. It remains to be seen if the financial aid discount model for colleges is sustainable long term. Either colleges will recoup the discounts through gifts from donors, the proceeds from endowments or other sources of aid, or they will have to somehow maintain their same level of service with less resources available. Whatever the future holds, in their interactions with students, financial aid and admissions professionals will be required to communicate an even more attractive value proposition for degree programs at their institutions. They will also have to make a persuasive cost/benefit case regarding the ultimate value of a college degree generally, and provide adequate services to help students stay on track in loan repayment once they are persuaded that borrowing is feasible. Challenge #2: Declining Enrollment There were some positive indications in the college enrollment picture last year. In fact, according to a report from the National Student Clearinghouse Research Center, declines in undergraduate fall-term enrollment began to moderate. The total number of registered students fell by just 94,000 in 2022, or 0.6 percent, in comparison to 2021. Community colleges and private, nonprofit four-year schools were able to hold their own after declines in enrollment the previous year. However, when those mildly positive numbers are combined with undergraduate data from all sectors and figures for graduate enrollment are thrown in, the picture darkens. Taken together, enrollment was still 5.8 percent below pre-pandemic, 2019 levels, which translates to 1.1 million fewer students. 7 That’s the continuation of a trend. As the Chronicle of Higher Education stated, based on research from the National Center for Education Statistics, college enrollment had been steadily declining – by 12.3 percent – through the 2010s. 8

200.00%

College Education Cumulative Inflation

Overall Consumer Prices (CPI-U)

800.00%

0.00%

600.00%

400.00%

301.63%

Undergraduate Enrollment Decline, 2009-2020

200.00%

Overall Consumer Prices (CPI-U)

18M

0.00%

12M

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

Note: Data are for institutions that grant associate degrees or higher in the 50 states and the District of Columbia that participate in Title IV federal financial-aid programs. 18M

Source: National Center for Education Statistics

12M

Of course, the disruption of the pandemic lent additional momentum to the enrollment decline.

Another trend from the research: Young men are opting out of college in droves, now accounting for just 41 percent of all college students. This may be because some of them are choosing to pursue careers in trades that offer apprenticeship programs or other paths to employment. 9,000,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0

Note: Data are for institutions that grant associate degrees or higher in the 50 states and the District of Columbia that participate in Title IV federal financial-aid programs.

Source: National Center for Education Statistics

8,500,000

And then, there’s the “demographic cliff.” Some trends are tipped off by important, sometimes catastrophic events, but their effects are not felt for decades. Because of lower birth rates surrounding the years of the Great Recession from 2007 to 2009, the number of newly minted high school graduates will begin to decline drastically by 2025. 9 Even though the world economy recovered after the recession, the decline in births continued until 2020, though on a shallower statistical slope.

The Looming Enrollment Cliff

8.25.2023

8,000,000

2021

2026

2016

Source: Higher Ed HR Magazine , CUPA-HR Forecasted data from Higher Education Demand Index (Grawe, 2016) 9,000,000

8,500,000

Public Four-Year

8.25.2023

8,000,000

Nonprofit Two-Year

2021

2026

2016

For-Profit Two-Year: 50% For-Profit Four-Year: 28% Nonprofit Four-Year: 18% Nonprofit Two-Year: 3% Public Four-Year: 1%

Source: Higher Ed HR Magazine , CUPA-HR Forecasted data from Higher Education Demand Index (Grawe, 2016)

Nonprofit Four-Year

For-Profit Two-Year

For-Profit Four-Year Public Four-Year

Takeaways: Declining college enrollment today is based in part on student desires and preferences. But in only a few years, the lower number of college-age young people will be a structural reality, and not a trend quickly reversed. For colleges that survive the resulting decline in educational demand, the cost per student to acquire new enrollees and set them up with financial aid packages will likely rise, as institutions have to work harder to serve each prospective student and retain existing ones. Source: Burns, et al. For-Profit Two-Year For-Profit Two-Year: 50% For-Profit Four-Year: 28% Nonprofit Four-Year: 18% Nonprofit Two-Year: 3% Public Four-Year: 1% Nonprofit Four-Year Nonprofit Two-Year

For-Profit Four-Year

125

100

Source: Burns, et al.

125

100

12M

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

Note: Data are for institutions that grant associate degrees or higher in the 50 states and the District of Columbia that participate in Title IV federal financial-aid programs.

Source: National Center for Education Statistics

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

Challenge #3: College Closures and Mergers The rising costs of higher education and the corresponding drop in enrollments have taken their toll. In fact, many colleges have paid the ultimate price – closing their doors or merging with other institutions after being in operation for decades or even centuries. 8,500,000 9,000,000 Note: Data are for institutions that grant associate degrees or higher in the 50 states and the District of Columbia that participate in Title IV federal financial-aid programs. Source: National Center for Education Statistics

9,000,000

8.25.2023

Between 2004 and 2020, 12,000 college campuses were closed. In a study by the State Higher Education Executive Office and the National Student Clearinghouse Research Center, researchers zeroed in on a selected sample of 467 schools from that total. Their analysis: 8,000,000 2016 2021 2026 8,500,000

Source: Higher Ed HR Magazine , CUPA-HR Forecasted data from Higher Education Demand Index (Grawe, 2016)

8.25.2023

• The for-profit sector was hit hard, representing 78% of the college closings, often due to loss of accreditation • 21% were private, nonprofit schools • Public institutions were steady, representing less than 1% of the closures – and those were mostly online programs • Two- and four-year schools split fairly evenly, with 53% of closed colleges two-year, and 47% four-year

College Campus Closures by School Type, June 2004-June 2020 2016 Source: Higher Ed HR Magazine , CUPA-HR Forecasted data from Higher Education Demand Index (Grawe, 2016) 8,000,000 2021 2026

Public Four-Year

Nonprofit Two-Year

For-Profit Two-Year: 50% For-Profit Four-Year: 28% Nonprofit Four-Year: 18% Nonprofit Two-Year: 3% Public Four-Year: 1%

Nonprofit Four-Year

Public Four-Year

Nonprofit Two-Year

For-Profit Two-Year

Source: Burns, et al. For-Profit Two-Year: 50% For-Profit Four-Year: 28% Nonprofit Four-Year: 18% Nonprofit Two-Year: 3% Public Four-Year: 1%

For-Profit Four-Year

Nonprofit Four-Year

For-Profit Two-Year

For-Profit Four-Year

An analysis by bestcolleges.com reveals that college closures started ramping up in 2012 and peaked about 2018. 10 Source: Burns, et al.

125

Trends in College Campus Closures by School Type June 2004-June 2020

100

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100

2004

2006

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2020

Public

Private Nonprofit

Private For-Profit

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Public

Private Nonprofit

Private For-Profit

Since 2020, at least 35 additional institutions have closed, with several others, at this writing, scheduled to cease operations in 2024. Most of these were small colleges with limited resources and small endowments, stressed by rising costs, dropping enrollments and the effects of COVID-19. Takeaways: Given the discouraging demographic forecast sure to affect future enrollments, we can expect more institutions to be shuttered in the last half of this decade. The challenge for the financial aid professional will be helping to make sure their school isn’t one of them. Institutions in the Northeast and Midwest, whose populations have already been declining for some years, may face the stiffest headwinds. Liberal arts schools will diminish, and job-oriented academic programs aimed at placement in high-paying fields such as computer science and healthcare will become more prominent. Because fewer competing higher education institutions will exist, available student populations will consolidate in the remaining institutions. That may help healthier colleges recruit new students, at least for a while. But colleges should not be surprised if, in addition to inquiries about academic programs offered, the cost of tuition and fees, and the amount of financial aid available, they also get some pointed questions from prospective students and their families about their institutions’ fiscal health. The disruption experienced by students whose colleges go under is profound. As colleges pursue more high-touch recruiting techniques to attract prospective students and retain existing students, they will need to be ready with convincing assurances about long-term viability. Challenge #4: Financial Aid Staffing Crisis At exactly the time when educational institutions need to redouble their efforts to compete for a decreasing student population of students – a population in which a greater percentage of new applicants may need substantial financial help – many financial aid offices are struggling to attract, hire and retain qualified staff. To be sure, financial aid staffing shortages are part of a continued trend across higher education. The Chronicle of Higher Education reported on a 2023 survey of staff members by the College and University Professional Association for Human Resources. 11 In the survey, more than half who responded said they were at least somewhat likely to be looking for a new job in the coming year. A third of the respondents said a new job search was likely or very likely for them. In the financial aid area specifically, 44 percent of respondents said they were at least somewhat likely to be seeking other employment. Because financial aid is the front door to higher education for many students, the staffing situation in financial aid offices may be regarded as especially critical. A report from The National Association of Student Financial Aid Administrators (NASFAA) underscores the severity of the problem. 12 In a March 2022 NASFAA survey of 500 institutions, half of the respondents said that staffing capacity in their financial aid offices was at just 75 percent for award years 2019-2020 and 2020-2021.

Those findings persisted in a follow-up survey given to another 500 institutions: 56 percent indicated they were also operating with insufficient staff – and that’s why they were unable to find the time to respond to the original survey.

The institutions cited a lack of qualified job applicants, accompanied by uncompetitive salary levels and a correspondingly high turnover rate, as the primary reasons for the staffing shortages.

When asked for some of the reasons permanent full-time employees gave for transferring from or resigning their positions in financial aid, the responses were telling.

Reasons Staff Leave Financial Aid

Higher salary or better benefits in new/different position

69%

No longer desire to work in financial aid

35%

Moved to a different office at the same institution

29%

Relocation

28%

Family obligations

26%

Desire for permanent remote workplace

20%

Dislike of current workplace policies

18%

Left the workforce

13%

No longer desire to work in higher education

Furthering their education

Other

216

The vast majority of former employees (69 percent) said better wages and benefits were their prime considerations, as might be expected. But half that number (35 percent) said they just no longer wanted to work in financial aid. And that answer was given almost three times more often those who said they no longer wanted to work in higher education generally (13 percent). Does this suggest that there is something about the nature of financial aid work itself that is unappealing? Perhaps insufficient staffing just makes it harder for financial aid employees to actually do the rewarding and essential work of spending time with students – to help them navigate the ordeal of applying for financial aid and repaying loans, and performing other functions directly related to a student’s welfare. A reduced staff may be occupied more with the nuts and bolts of compliance with federal requirements. In the NASFAA survey, many community colleges and institutions serving minorities testified to staffing

challenges growing out of the pandemic – 44 precent and 45 percent, respectively. A shortage of financial aid staff in such institutions, which often serve low-income populations, will adversely affect the students who need financial help the most. Takeaways: Financial aid offices are one of the lynchpins in institutional viability, helping to make a college education possible for more students. But qualified employees may not sign on for financial aid duty if salaries are inadequate or the work frustrating or unfulfilling.

Colleges will have to make a more substantial investment in this area – not just to have enough hands to get the bureaucratic work done, but to create better educational outcomes for the students they serve.

Problems Have Solutions The challenges facing higher education generally, and financial aid departments specifically, are surely daunting. But part of the solution lies in “thinking outside the box” and establishing a relationship with a trusted partner like Inceptia to address financial aid and admissions issues head-on. Paradoxically, even while experiencing short staffing in an area so critical to an institution’s long-term success, many colleges are slow to adopt outsourced solutions in financial aid, enrollment management and other direct student services. Some of this reluctance is based on a concern about culture – the institution wants its vision and values to be communicated to students and their families by its own committed staff, the people who know these cultural differentiators best. And yet, the time required for laborious, back-office functions often prevents more of these quality conversations from taking place.

Ultimately, outsourcing adds value by giving schools the bandwidth to represent themselves more effectively to their constituents.

The Benefits of Partnership Outsourcing cumbersome, time-consuming functions to a secure, off-site provider will free up staff to refocus on student success. With more than 35 years of history in the field, Inceptia’s team offers unparalleled expertise and direct leadership experience in higher education offices, with emphasis on improving processes that impact enrollment through the borrower life cycle. We uncomplicate student services by striving to meet the needs of students, administrators and schools in a constantly changing environment. By focusing on removing obstacles, uncomplicating processes, and helping create more knowledgeable borrowers, Inceptia provides a steady foundation of innovation schools can count on.

Through a service partnership with Inceptia, colleges can enhance the student experience with intuitive, streamlined processes; reduce expenses; and refocus teams on offering meaningful learning experiences. As a nonprofit organization, our mission is helping institutions effectively serve their students. Inceptia’s Solutions We offer our expertise in a line of holistic services that go beyond college enrollment and initial financial aid to embrace a student’s whole educational and financial life. Our solutions reduce complication by providing intuitive, supportive tools for students and time-saving processes for administrators. Financial Aid Management : Solutions that streamline processes and promote effectiveness in verification; handling requests for professional judgment; managing the Satisfactory Academic Progress process and SAP appeals; borrower awareness; and interaction with students. Student Outreach Programs : Student advocate counselors engaging with new, returning and withdrawn students to promote processes that lead to enrollment, reduce student anxiety and address barriers to continuing their higher education journey.

Repayment Wellness : Innovative, direct outreach modes and resources that equip students to manage their debt – and help you manage your default rates.

Smart Borrowing : Helps students become knowledgeable borrowers with easy-to-understand debt letters, helpful reminders and online resources to help them get on track.

Financial Education : Content-rich, online courses that teach positive financial behaviors to set students up for informed money management habits.

Testimonials “The administrative demand within higher education financial aid is complex and overwhelming at times. It was a welcomed relief for Inceptia to take over verifications so our teams could provide both a greater focus on community outreach and training activities for staff.” Steve McDowell Associate Vice President for Financial Aid Services and Title IV Compliance Connecticut State Colleges and Universities “This [student] outreach campaign was extremely helpful to promote our fall enrollment, and actually allowed us to reach our first-time-freshmen goal. It’s a valuable return on our partnership investment [with Inceptia] – 181 more people that are enriching their lives through education, and that’s really our goal.” Dr. Kohle Paul Vice President, Student Affairs Gwinnett Technical College “Typically, when students weren’t repaying their loans it’s because they were unaware of how to pay the debt back and then would go into hiding. Inceptia stepped in when we couldn’t and made students aware of their repayment options, and that made the difference. Their solution was brilliant.” Megan Hartless Financial Aid Director Blue Ridge Community College Talk To Us To learn more about how Inceptia services can benefit your students and school, contact us at 888.529.2028 or visit Inceptia.org.

About the Author Sue Downing, Senior Vice President & Officer

As Senior Vice President and Officer, Sue Downing manages client services, product development, marketing and financial education at Inceptia. Sue is a performance-driven Senior Executive offering 30 years of comprehensive achievements across Nonprofit, Higher Education, Retail and Finance disciplines. Further, she is an expansive, entrepreneurial thinker with an outstanding record of achievement in developing and implementing new business strategies and delivering innovative new products. Prior to Inceptia, Sue held senior management positions with Nebraska Book Company and First Data/ Western Union. As a resourceful, intuitive communicator, Sue readily establishes a trusting rapport with colleagues and customers alike. Sue holds a Bachelors of Journalism from the University of Nebraska.

Sources 1. C ollege Tuition Inflation: Compare the Cost of College Over Time (May 2023), retrieved from https://www.forbes.com/advisor/student-loans/college-tuition-inflation/#:~:text=In%201980%2C%20the%20 price%20to,That’s%20a%20180%25%20increase 2. College Tuition & Fees vs. Overall Inflation (November 2021), retrieved from

https://inflationdata.com/articles/charts/college-tuition-fees-inflation/ 3. W age Stagnation in Nine Charts (January 2015), retrieved from

https://www.epi.org/publication/charting-wage-stagnation/ 4. Student Loan Debt Statistics (August 2023), retrieved from https://educationdata.org/student-loan-debt-statistics 5. Perception is Reality: Attitudes and Experiences of Student Loan Borrowers (August 2022), retrieved from http://dx.doi.org/10.2139/ssrn.4197367 6. Tuition Discounts Hit Another Record High (May 2022), retrieved from https://www.insidehighered.com/news/2022/05/20/tuition-discounts-hit-all-time-high-nacubo-study-finds# 7. Fall 2022 Enrollment Overview (February 2023), retrieved from https://public.tableau.com/app/profile/researchcenter/viz/CTEE_Fall2022_Report/CTEEFalldashboard 8. H igher Ed’s Enrollment Crash Has Been Underway for Years (June 2022), retrieved from https://www.chronicle.com/article/higher-eds-enrollment-crash-has-been-underway-for-years?cid=gen_sign_ in 9. The Looming Enrollment Cliff (Fall 2019), retrieved from https://www.cupahr.org/issue/dept/interactive-enrollment-cliff/ 10. C losed Colleges: List, Statistics, and Major Closures (September 2023), retrieved from https://www.bestcolleges.com/research/closed-colleges-list-statistics-major-closures/#fn-2 11. H igher Ed’s Work-Force-Retention Problems Aren’t Going Away (September 2023), retrieved from https://www.chronicle.com/article/higher-eds-work-force-retention-problems-arent-going-away?utm_ source=Iterable&utm_medium=email&utm_campaign=campaign_7725929_nl_Academe-Today_ date_20230915&cid=at&sra=true 12. Source: Financial Aid Offices Face Intensifying Staffing Challenges Amid Pandemic (May 2022), retrieved from https://www.nasfaa.org/uploads/documents/Financial_Aid_Offices_Face_Intensifying_Staffing_Challenges_ Amid_Pandemic.pdf

About Inceptia Inceptia helps colleges, universities and trade schools strengthen relationships and boost enrollment using agile, dependable solutions that enable students to successfully navigate admissions and financial aid, borrow wisely and resolve their loan repayment challenges. With tailored solutions, a deeply knowledgeable staff and a nonprofit’s commitment to service, Inceptia serves as an extension of your team, empowering you to reach, influence and close the loop with students faster so you can focus on what matters most — student success.

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