Where Have All the Students Gone? Enrollment Trends in Private Sector Higher Education

After years of double-digit growth in new student starts, private sector higher education providers encountered a vastly changed landscape in 2011, with total industry starts falling more than 20%. Market participants and investors are focused on a basic set of questions: Where have all the students gone? And when are they coming back? Many hypotheses have been offered on these questions, but – to date – little hard data.

For years, enrollment trends in private sector higher education have followed predictable models. These models held as the onset of the recession led to dramatic enrollment growth, and stayed on-track as unemployment stabilized at high levels. Demographic trends and a counter-cyclical response to the economy were reliable indicators of enrollment levels.

Today, private sector enrollment has decoupled from these historical norms, as the industry is buffeted by both new short- and long-term forces. In the short term, deep pessimism about the labor market and increased price sensitivity are changing the cyclical nature of the sector. These trends are taking place on top of a natural maturing of the industry, as the target demographic is increasingly well-penetrated and signs point to gradually decelerating growth. Companies that succeed through this trying period will need to understand what to expect as the market slowly “resets,” and how to compete in the new reality.

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