There is a growing number of financial analyses saying that 2020 is looking better and better for a good old-fashioned recession.
Analysts at UBS say the risk of recession or at least major contraction in the economy has shot up to 73%.
Last month, Business Insider asked dozens of Wall Street experts and analysts about the most important trends in markets right now. One idea addressed multiple times from varying perspectives was the likelihood of a recession in 2020.
But what would a recession in 2020 mean for higher education? In this episode, I take a look at the impact of the previous “Great” recession in 2008/2009 and look at possible futures for higher education in the context of a new economic downturn.
Education Futures Episode 6: How WIll U.S. Higher Education Respond to the Next Recession?
Full Transcript
Not for nothing, there is a growing number of financial analysis saying that 2020 is looking better and better for a good old fashioned recession.
Analysts at UBS say the risk of recession or at least major contraction in the economy has shot up to 73%.
Last month, Business Insider asked dozens of Wall Street experts and analysts about the most important trends in markets right now. The result was a series of 47 charts and trend overviews covering trends that range from manufacturing to stock market performance. One idea addressed multiple times from varying perspectives was the likelihood of a recession in 2020. The prognostications include statements such as:
- “There’s a “two-thirds probability” of a recession this year.”
- “We have as much as an 80% chance of a recession.”
- “The drops we’re seeing in consumer confidence often forebode a recession”
- “Stocks are saying ‘welcome to the recession.’”
Of course, not everyone is predicting gloom and doom for the economy, and no one can say with certainty whether or not we’ll see a recession in 2020. That said, there’s enough noise out there that I think it’s safe to talk about the possibility and what a 2020 recession might mean for higher education.
Before jumping to the future, however, I think we’d be well served by looking back at the past, more specifically at the Great Recession of 2008/2009 and the impacts of that economic contraction on higher education.
Looking at the Recent Past
Bigger Tuition Discounts
Before that recession, higher education was definitely a seller’s market. There was an abundance of students who were willing to pay the full sticker price for a college education.
With the economic downturn, however, the status quo changed dramatically. The job market contracted and suddenly-out-of-work adults began looking for opportunities to retool. In addition, financial disruptions like the failed housing market meant families had less disposable income available to pay for education. And finally, government allocations to colleges and universities also declined, resulting in greater pressure to recruit more students.
The end result of these changes was a shift from a seller’s market to a buyer’s market. In this new competitive landscape, colleges and universities began discounting tuition heavily, both for in-state and out-of-state students.
A Focus on Jobs
The last recession also precipitated a shift in majors. Students became increasingly concerned about studying subjects that would lead to meaningful employment. One consequence of this shift was a decline in Humanities majors. As Jeff Selingo writes:
A decade ago, nearly 8 percent of all undergraduates chose one of the “big four” humanities majors: English, history, philosophy or a foreign language; today, less than 5 percent do. The number of students majoring in history has dropped by 44 percent since 2008, while political science and sociology are down by more than 20 percent.
The Rise of For-Profit Colleges
Not surprisingly, intensified competition for student enrollments and a shift in study priorities opened the higher education market to new business models and competition. The best example of this can be seen in the rapid rise of for-profit colleges.
In spite of higher tuition and lower graduation rates, many students were attracted to for-profit colleges during and after the last recession, as an alternative to traditional universities. With an emphasis on easy enrollment, class flexibility, and job-focused degrees, for-profit colleges gained significant traction, reaching a peak enrollment representing 11% of the higher education market in 2010.
Student Debt Doubled
In spite of the tuition discounts and the promise of jobs, one unfortunate outcome from the last recession was the continued rise in U.S. student debt, which has more than doubled since then (exceding $1.5 trillion).
Looking to the Future
So, in one sense, the last recession brought about some big changes in approaches to the market and marketing. On the other hand, the more things changed the more they stayed the same.
- Tuition was discounted but tuition prices continued to rise across the board. College did not become more affordable for students.
- The market emphasis on jobs and job training was absorbed into university programs in the form of high-profile degrees, such as data analytics, which can support higher price tags.
- While the for-profit college market has declined, it has been replaced by the mega-university (Arizona State, Southern New Hampshire, Grand Canyon, Liberty, and Western Governors). There is greater integrity and increased academic quality, but tuition remains too high for un(der)served markets.
In short, higher education remains somewhat committed to maintaining its existing business models and approaches to education.
But how might that change with the next recession? What possible developments might we see in high education in the next economic downturn?
Not surprisingly, we’ll likely see a return of some familiar themes.
- Affordability will certainly be a big issue. Our current solutions for addressing the rising costs of higher education — federal grants and state-subsidized tuition programs (“free college”) — will be curtailed dramatically or eliminated altogether. Prospective students, already saddled with burdensome debt and unsure about an upturn in the job market, will be less inclined to incur unreasonable student debt than were earlier generations. As is often the case, un(der)served populations will suffer disproportionately due to a lack of education and opportunity. These pressures should give rise to new models for affordability, models that promote sustainable affordability, the elimination of student debt, and equitable access for everyone.
- The next recession will also refocus higher education on jobs and study programs that lead to successful employment and careers. We will again see increasing numbers of unemployed adults enter the college education market, but traditional students will also shift their interests to majors and degrees that guarantee jobs. Vocational education programs will proliferate at traditional institutions and general education will likely be reshaped to address the skills needed for professional success.
- Finally, we will definitely see a good number of new and disruptive business models in higher education during the next recession. The number of mega-universities will increase as scale becomes a critical ingredient for affordable and efficient solutions. At the other end of the spectrum, the next recession will almost certainly result in significant consolidation in the market, with large numbers of closures and acquisitions.I also believe the next recession will tip the scales toward the emergence of sizeable, company-guided education programs, that run in partnership with higher education (Starbucks, Walmart, and Papa John’s), or in parallel to it. With intense pressure on upskilling and retooling workers, companies will be much less patient with traditional education as a mechanism for addressing their labor-shortage issues.
Of course, as I said before, no one can say with certainty whether or not we’ll see a recession in 2020. That said, I think there are plenty of indicators from the last recessions that let us know what to expect when the next economic downturn does happen.
For Further Reading
- How the Great Recession changed higher education forever
- How the 2008 financial crisis fueled enrollment at for-profit colleges
- An academic accreditor looks at higher ed’s horizon
Rob Reynolds, Ph.D.
Executive Director, TEL Library
