Declining Birth Rates and Economic Barriers Reshape U.S. Higher Education

The closure of Presentation College in South Dakota in May 2023 exemplifies a troubling trend in U.S. higher education. Declining enrollment, linked to low birth rates, forced the college to shut down after nearly seventy years. Presentation is one of many small, tuition-dependent institutions facing similar fates, reflecting the demographic and economic pressures reshaping education.

The U.S. fertility rate fell to 1.64 births per woman in 2020, the lowest on record, according to the National Center for Health Statistics. Although it slightly increased to 1.66 in 2021, it remains below the replacement level of 2.1. This demographic shift will significantly impact college-age populations over the next decade, with projections indicating a steep enrollment decline starting around 2025.

Demographer Nathan Grawe from Carleton College predicts that college enrollment could drop by nearly 15% between 2025 and 2035. "The combination of fewer students graduating from high school and rising costs has created a perfect storm for many colleges," Grawe said during a recent panel discussion hosted by the American Council on Education. For smaller colleges and public institutions in states with declining populations, the consequences could be severe.

Economic barriers exacerbate these demographic challenges. Over the past thirty years, average tuition at four-year institutions has more than doubled, outpacing inflation and wage growth. Federal and state funding for public universities has declined in real terms, leading to higher tuition and increased reliance on student loans. The Federal Reserve Bank of New York reported that U.S. student loan debt surpassed $1.7 trillion in 2023, creating a crisis of affordability.

Low-income and minority students have been disproportionately affected by the interplay of declining birth rates and rising costs. A report by the Georgetown University Center on Education and the Workforce found that while enrollment among high-income students remained stable, enrollment among students from the bottom income quartile fell by 20% between 2010 and 2020. "Economic disparities in who can afford higher education are worsening," said Anthony Carnevale, the report’s lead author. "Without intervention, we risk deepening inequalities across generations."

These pressures are pushing some institutions to innovate, while others close or consolidate. In 2021, the University of Alaska system merged its engineering schools and considered closing campuses due to declining enrollment and budget cuts. Similarly, Vermont consolidated three state colleges into Vermont State University in 2023, citing financial sustainability as the primary motive, though critics argue these changes erode local access to education.

Ironically, while traditional institutions struggle, alternative educational providers—such as online universities and coding bootcamps—are thriving. Western Governors University, an online nonprofit, doubled its enrollment to over 140,000 students between 2016 and 2022. "The market is shifting toward shorter, more affordable programs," said Bridget Burns, executive director of the University Innovation Alliance. "But they’re not a substitute for the broad-based education colleges traditionally provide."

The federal government has taken steps to address these challenges. The Inflation Reduction Act of 2022 expanded Pell Grant funding, increasing the maximum award to $7,395 in 2023. However, critics argue these measures are insufficient. "We’re nibbling around the edges," said Sara Goldrick-Rab, an education policy expert at Temple University. "What’s needed is a strategy that prioritizes equity, affordability, and sustainability across the board."

As the enrollment cliff approaches, questions about the future of higher education arise. Will flagship public universities consolidate their dominance at the expense of smaller institutions? Can community colleges, already underfunded, absorb displaced students? How will a system reliant on growing enrollment adapt to a shrinking student base?

The stakes are high for institutions and the broader economy. A 2022 study from the Lumina Foundation estimated that every dollar invested in higher education yields $3.50 in economic returns over the long term. If fewer Americans earn degrees, the workforce risks falling behind in high-skill industries, from technology to healthcare.

Ultimately, solving this crisis will require a reassessment of higher education’s value and financing model. As Carnevale noted, "We have to stop treating higher education as a private good. It’s a public necessity, and our policies need to reflect that." The coming decade will test whether policymakers, educators, and voters are willing to act on that principle.