May 17, 2023Client Alert

The Looming Demographic And Enrollment Cliff: Proactive Strategies and Legal Considerations to Address This and Other Challenges in Higher Education

The impending demographic and enrollment cliff is not news to anyone in higher education.  The sharp decline in high school graduates that is expected to decrease enrollment numbers significantly is only a few years away.  Higher education institutions (“HEIs”) can, though, develop and implement a plan to lessen the financial and other impact of the demographic and enrollment cliff. 

HEIs will want to think strategically and creatively as they prepare an individualized holistic plan to help ensure their long-term survival and fulfillment of their mission.  This plan also should take into account the legal implications of potential actions.  This article touches on a few of the potential strategies HEIs can implement to illustrate the type of planning that can enable HEIs to adapt to this particularly dynamic time and challenge in higher education.

Student Recruitment Considerations

One of the first items for HEIs to evaluate in their efforts to keep enrollment steady over the coming years is to develop a comprehensive recruiting strategy, such as how and where to recruit new students and what types of students to target.  Notably, the demographic cliff is not impacting all regions equally.[1]  Given the unequal impact of the demographic cliff, HEIs will, or course, want to evaluate which high schools they focus their recruiting efforts on, and which high schools send the most graduates to the HEI.  If HEIs find they are focusing their recruiting efforts on high schools disproportionally affected by the demographic cliff, in the coming years there will inevitably be fewer students in the pool of candidates.  Analyzing how many students are currently enrolled and expected to enroll in the high schools HEIs recruit from will enable them to assess whether a change in recruiting strategy is needed to tap into new geographic markets. 

Recruiting a new demographic of students is one option to pursue to help address the impact of the demographic and enrollment cliff.  This might include adult learners, minority or first-generation students, or reaching out to former students who have not completed their degree program.  HEIs intending to recruit adult learners and other non-traditional students need to be prepared to accommodate their different needs.  One key way to do so is by offering non-traditional courses and course schedules given these students are more likely to be employed and have familial obligations making it difficult to attend class in-person during the day like a traditional college student.

HEIs intending to target minority students need to be aware of two pending decisions before the United States Supreme Court, which might significantly impact an HEI’s ability to consider diverse factors during the application process.[2]  Further, HEIs who intend to attract more diverse students through scholarships that include selection criteria based on diverse characteristics (e.g., race, ethnicity, national origin, sex, or gender) should tread carefully as the outcome of these two decisions could have a broader impact.

Focus on Student Retention

Of course, another important element of a broad plan for addressing the challenges of the demographic cliff is improving the retention of current students.  Generally, HEIs that can build a sense of community among students have better retention rates.  Some ways to build community include extracurricular activities, clubs, and athletics.  Academic outcomes are also important for retention as poor academic performance is a major reason students leave school.  Providing additional academic support for students, such as tutoring services, study groups, academic advising, supplemental instruction, and providing resources to improve students’ note-taking skills, time-management, exam preparation, and stress management all can be beneficial tools to enhance student retention rates.  Finally, prioritizing student success and well-being by investing in students’ mental health services and wellness programs also can assist HEIs' retention efforts and success.  This strategy focused on addressing the mental health and well-being of students already is prompted by the huge number of students facing mental health issues and utilizing campus counseling centers.

Longer-Term Strategies for Economic Prosperity

HEIs are more likely to create a sustainable business model through high-level strategic thinking, planning, and action characterized by diversification and strategic, long-term revenue growth.  However, successfully accomplishing this goal requires institutional willingness and resolve, as well as creativity and innovation.  Therefore, leadership and key stakeholders need to be on board with an innovative strategic plan.

A few examples of longer-term strategies for addressing financial challenges include: increasing productivity of academic departments and administration; adopting new technologies; and assessing course enrollments and program demand.  Therefore, if adjustments are necessary, HEIs are advised to make them so that they align with the HEI’s overall long-term strategy.  Below are additional strategies that some HEIs are pursuing successfully.

Private Partnerships

Partnerships with private for-profit companies are becoming more common—especially for small private institutions that might not have the funding or administrative resources needed to manage new investments.  These partnerships are particularly beneficial for funding large capital projects and creating new revenue streams (e.g., offering student apartments on HEI property, providing dining services, mixed-use facilities, or monitoring information technology).  These partnerships allow the HEI to transfer costs, management, and risks to its outside partner who has more expertise and resources while creating opportunities for revenue neutral or revenue enhancing developments and other projects.

Changes in Control

More transformative long-term strategic decisions might include mergers, acquisitions, affiliations, or closures (of an academic program or a complete dissolution).  HEIs considering such solutions are likely to trigger a change in control.  Under these circumstances, HEIs should keep in mind their non-profit status, complying with their accreditors’ requirements, retaining their identity, and that a closure and dissolution are often shaped by the various state, federal, accreditation, and local regulatory consents and the applicable law.[3] 

Analyzing internal policies and procedures will guide how an institution plans for and implements a change in control.  There might be policies or procedures the HEI must follow prior to implementing a change in control.  If time allows, an HEI should consider whether it can amend these policies or procedures to give the institution more flexibility as it goes through the change in control.  A few examples of items that might require internal compliance include: faculty handbooks; student handbooks; financial aid materials; admission materials; recruiting materials; shared governance agreements and procedures requiring consultation with faculty before program reduction or faculty termination; unwritten past practice; and verbal representations or promises.

HEIs also will need to analyze tax considerations in advance of a merger or other change in control.  These include observing the Internal Revenue Service (“IRS”) guidance to ensure the preservation of tax-exempt status, and in some instances, a new application for tax-exempt status might be required.   

By thinking strategically and proactively about their futures, no matter what type or degree of challenges they anticipate from the demographic cliff and other factors impacting higher education, HEIs can develop an overall plan designed to meet such challenges while continuing to fulfill their mission.[4] 

We invite you to join us for a complimentary live webinar during which we’ll explore this pressing topic in greater detail. On June 20, Michael Best Partners Daniel Kaufman and Hamang Patel will host a panel discussion with former President of Loyola University Jo Ann Rooney, Augusta University Vice President and General Counsel Chris Melcher, and Baker Tilly Senior Manager Katlyn Andrews on how your institution can weather the storm.

CLICK HERE to learn more and register. 


[1] Christopher Harris, How to Climb Higher Ed’s Impending Demographic Cliff, Capture Higher Ed, March 17, 2022, available at:

[2] The two cases are: Students for Fair Admissions, Inc. v. President and Fellows of Harvard College and Students for Fair Admissions, Inc. v. University of North Carolina

[3] See P. Bergeson, J. Hundrieser, & J. Olivieri, Taking the Risks out of RIFs and Budget Cuts:  A Disciplined and Equitable Approach to Making Hard Choices, NACUA (2019) for an in-depth discussion on reducing costs and alternative solutions for achieving long-term financial stability.

[4] This client alert is a part of a larger article prepared for the Associated Colleges of Illinois, which can be read HERE.

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