Did private higher education just reach an inflection point?

American private colleges and universities received some major financial news this week, which raises the possibility that higher education prices are at a decisive point.

A report from National Association of College and University Business Officers (NACUBO; paywalled) found that only a minority of private institutions saw student enrollment increase.  Instead,

slightly more than half of the survey respondents said they saw a decline in enrollment or no growth.[emphasis added]

At the same time, these institutions offered the highest tuition discount rate of all time.  (“Discount rate” means the average price cut students receive after a school gives grants, scholarship, and other financial aid)

A TIME writer puts it succinctly:

many private colleges in the United States are ramping up their financial aid packages in an attempt to attract new students and boost sagging enrollments…

But those enrollments continue to flag.  Especially for small colleges and universities: “Tuition discounting … often failed to have the desired effect, especially at small, less-selective institutions…”

What does this mean?

The report’s findings draw together a series of forces:

1. Many middle-class families saw their wealth decline and compensation stagnate over the past decade (for example).
2. Students and their families are increasingly sensitive to price, pre-discount.  This leads some to other alternatives, such as state schools.
3. Although average debt is fairly low, popular stories about huge, debilitating debts are probably influencing people.
4. Published tuition – sticker price – keeps rising.  Reasons for this are various, including rising staff costs and some institutions’ physical plant renovations, but paying for faculty is usually the biggest one.
5. American demographics suggest a smaller teenage population over the next decade.

All five of those forces could well continue over the next few years.  #1′s impact will last for a long time, even if the US economy enters a real recovery period.  Stories of #3 seem to have long legs so far, and loom large in the minds of students looking at a darkened post-graduation employment landscape.   #4 is likely to persist, given the presence of a body of tenured faculty (whose cost will only rise with time), and the already very low salaries for non-tenure-track instructors.  #5 is already baked in.

But the specter of declining enrollment is a powerful one for campus leadership, and could provoke strategic changes.  What might they look like?

Here’s a quick roster of possibilities.  Please feel free to add in comments:

Back to the elite.  Some institutions, especially the well resourced, win students from very wealthy families.  Prices keep rising, and good capital returns mean their endowments grow healthily; combined, they can offer attractive aid packages to the most attractive members of the shrunken middle class.  These schools offer superb pedagogy, and represent class dynamics resembling those of a century+ past.

Closing up shop.  Other institutions fail to win enough students from wealthy families, despite high discount rates.  They enter a decline spiral as resource constraints limit what they can offer to increasingly discerning prospective students, which reduces their reputations.  Dropping reputations and resources chase each other down to the bottom.  Some campuses simply close, while more successful institutions purchase the assets of others.

The bubble pops. A small group of colleges and universities reduce their published tuition figures, hoping that media excitement will boost applications enough to make up for reduced revenue.  Some fund this by: further increasing the number of adjunct faculty; closing departments attracting few students (and thus losing tenured professors); cutting back physical plant work; outsourcing information services (library and/or IT); winning wealthy international students.  Once a formula for doing this appears to work, other institutions implement it, and private college tuition begins to climb down from its 2013 peak.

More of the same.  Despite the NACUBO report, institutions maintain the same policies.  In the minds of students the solid college wage premium manages to defeat fears of post-graduation debt.  Schools expand the number of wealthy foreign students. Online learning never goes mainstream, remaining in niche curricula and markets.  Tuitions rise, but enough families deem them worth the debt.

Which of these seems likeliest?  What other options are available?  Comments welcome.

(“College” photo by Tax Credits)