Demographic Winter Already Reaching The College Bubble

When I saw the headline at Bloomberg.com I thought it was going to say something dismissive about the intelligence and academic abilities of children in the Midwest: “Dwindling Midwest High School Grads Spur College Hunt.” But no. It is not that the children of the Midwest have fewer high school graduates among them. It is that there are fewer Midwest children who can graduate. Because there are fewer Midwest children.

 A waning number of high school graduates from the Midwest is sparking a college hunt for freshman applicants, with the decline being felt as far away as Harvard and Emory universities.

The drop is the leading edge of a demographic change that is likely to ease competition for slots at selective schools and is already prompting concern among Midwestern colleges.

“You can’t create 18-year-olds in a lab,” said Brian Prescott, director of policy research at the Western Interstate Commission for Higher Education in Boulder, Colorado. “Enrollment managers are facing an awful lot of pressure that they can’t do much about.”

Nationally, the high school Class of 2012 ushered in a first wave of declines in the number of graduates, according to a report by the commission. The trend will worsen after 2025, when admissions officers face the impact of a drop in births that began with the 2007 recession. Over the next two decades, the biggest drain in graduates will be in the Midwest and Northeast. The demographic shifts are compounded by economic factors as the cost of higher education continues to rise.

That last sentence is a joke. The cost of higher education is going to drop through the floor as the number of potential students declines. Yes, we know the government will do all it can to subsidize the schools rather than let them reduce prices or close down. Big Government is powerful, but eventually it will have to admit it can’t put ghost-town colleges on permanent welfare. It was already obvious we were facing a tuition bubble even before factoring in the declining number of high school graduates.

Notice that this demographic downturn became far worse when the recession began. I have written about this before. This is how an economic recession can turn into a generation of lowered standards of livings. People respond to economic hardship by not having babies which dooms them to a future of worse economic hardship.

Just to be clear, people don’t pay higher tuition because college costs rise. That may be how it feels on an individual level but as an economic trend the cause and effect goes the other way. College costs rise because people are willing to pay higher tuition. So anyone who tells you that 1) the number of potential customers will go down, and 2) prices will continue to rise, is almost always wrong. Prices can only rise if there are some other needed final products that are also bidding up the costs. But in the case of colleges, I don’t think they have a lot of other uses besides serving the needs of college students. So tuition is going to eventually drop drastically.