The Decline in Four Year Inistitutions of Higher Education

By Richard Vedder

Tom Mortenson of Postsecondary Education Opportunity is somehow wired differently from us folks at CCAP. We often interpret facts differently. If Tom were to say "empirical evidence leads me to believe that the sun will rise in the East tomorrow, June 2" I might have to rethink my own similar views on the subject. But Tom is unsurpassed in the way he mines data on higher education, with imagination, panache, and, above all, integrity. If you are interested in access issues, run, do not walk, to his web site at http://www.postsecondary.org CCAP is an avid subscriber and consider Tom's work indispensable. This and two subsequent blogs draw from the May issue of his monthly newsletter to subscribers.

A funny thing has happened since 2001: four year colleges have been steadily losing market share of entering postsecondary students. In that year, the Current Population Survey data that Mortenson uses suggested that 68.1 percent of recent high school graduates that went on to college entered four year schools. That share, a modern day high, fell in 2002, and again in 2003, 2004, 2005, and 2006. The 2006 share, 62.7 percent, was the same as it was in 1992, when the 4-year school share was still trending up over time. As Tom correctly notes (we sometimes agree on data interpretation) "If these enrollment shifts...continue, then by 2010 when the total number of school graduates begins its projected decline 4-year colleges and universities will be especially hard hit and find it especially difficult to fill their freshman classes."

This new trend, if sustained, reverses the pattern of the 1980s and 1990s, although revives a trend prevalent in the 1950s and 1960s. In Gong Broke By Degree (AEI Press, 2004) I argued that as incomes rise, parents are more willing to pay big bucks to confer economic advantages on their kids --hence the frantic desire of many to get into elite private universities compared with two generations ago (when I casually turned down admission to Harvard and went to a nearer but slightly less prestigious school, Northwestern, whose 2006 entering class had average SAT scores approaching 1500). Four year schools have what economists call a "high income elasticity of demand" while the two year schools in economist lingo are "inferior goods" --demand falls as income rise, somewhat like with bus travel. However, the recent data contradict this. What has happened, then, in the last five years to challenge that conventional wisdom?

While several ideas come to mind, I think a lot of it has to do with finances. The cost of four year schools has risen very considerably since 2001, while that of two years schools, always lower, has risen less rapidly. The price differential between the two alternatives has grown rather sharply. People prefer to pay less than more. The two year schools take the mission of maximizing access and affordability very seriously, but the four year schools typically do not, their rhetoric notwithstanding. It appears that an increasing proportion of students with their parent's support are saying "I will try a two year school, and if I do well I will transfer to the four year institution, thus saving money and still earning a ticket to a nice paying job." Fear of this trend is no doubt one reason why four year schools sometime erect educationally illegitimate obstacles to the acceptance of transfer credit from two year schools.

The fear of racking up huge college loan debts and the real possibility of dropping out of school makes "investing" in a four year education somewhat risky and problematic for many kids and their families of moderate means. All of this, of course, is leading to the growing stratification within higher ed, with even the flagship state universities becoming elitist bastions for the affluent who live in increasing luxury in country club-like settings, getting some cultural enrichment and learning in between visits to the rec center, student union, and the local bars.

For years, I have been saying that the four year schools will have to alter their behavior --that current trends are unsustainable in the long run. The recent upsurge in reform sentiment, beginning with the Spellings Commission, is a manifestation of that reality.