In speaking with boards this fall and winter, I’ve admitted that I can’t recall a time in the many years I’ve worked with trustees when I’ve suggested the competitive environment for colleges was getting better—or even easing. But compared to right now and the near future, the pre-credit meltdown years seem like a golden age. The years between then and now benefited from relatively steady demographics and inflated asset values. Those tailwinds are gone.
Today’s environment is markedly different, and institutions must rethink how they allocate resources—particularly when it comes to enrollment.
Budgeting in a Tuition-Dependent Environment
Budgeting—the process by which institutions fund what they value most—is never simple, particularly for tuition-dependent colleges.
Most segments of the higher education enterprise are now experiencing increasing costs and declining revenues beyond tuition. While it may be true that colleges and universities will spend every available dollar, it is also generally true that institutions set a higher bar for expenditures that do not directly improve student learning.
At the same time, colleges find themselves needing to reduce expenses to match revenue. Trustees are rightly focused on balancing budgets and working toward sustainable operating economics.
The Changing Role of Trustees in Budget Decisions
Most trustees operate under the philosophy of “noses in, fingers out,” as one former president described the best delineation of roles. They defer to presidents and their leadership teams with respect to budget construction.
However, I see this dynamic changing.
More trustees are pushing for strategic budget allocation, allowing for selective investment rather than general erosion across the institution. In a shared governance environment, these conversations also involve faculty and often include student input as well. This shift reflects a growing recognition that not all budget cuts are created equal.
The Problem with Across-the-Board Budget Cuts
Given the competition for dollars, many colleges unsurprisingly adopt an “across-the-board” approach to budget cuts. But we have reached a point where, for most colleges, such an approach is simply a shortcut to the next round of budget cuts. Colleges simply cannot invest less—or invest less effectively—in their enrollment programs and expect to improve enrollment numbers or revenue in the next cycle.
The days of doing more with less are—with only a few exceptions—over.
The Demographic and Market Reality
The demographic downturn is well known, as is the declining incidence of affluent families within that demographic. Participation had already been declining well before demographic changes became imminent. Covid-era funding is gone, but the enrollment patterns disrupted during that period mean dependable markets still need to be reclaimed.
Within the declining demographic environment, institutions must also navigate:
- Domestic migration patterns
- Shifting student preferences toward flagship public universities
- Increased interest in institutions located in more temperate regions
These forces are reshaping enrollment markets in ways many institutions are still adjusting to.
The Enrollment Marketing Challenge
Beyond demographics, we are in what could best be described as a buyer’s market. Established techniques through which colleges reach students directly are simply not as effective as they were a short time ago. Email deliverability, for example, has become a significant challenge.
While some issues can be addressed through institution-wide domain management, many factors are determined by Google and increasingly by state and federal policy—not to mention the less rigorous practices of parts of the marketing industry. At the same time, many students now appear as “stealth applicants.”
Managing this reality requires the ability to see and manage prospect data—something most colleges historically have not done well. One response is to treat these prospects as inquiries, but doing so requires significantly greater spending on communications and staff to manage the increased volume. Either way, cost-per metrics deteriorate.
The Funnel Is Changing
Conversion rates throughout the enrollment funnel are declining across the board. Fewer unique students are applying, but those students are applying to more colleges. This inflates perceived demand. In response, colleges admit more students—but doing so requires more extensive programming and staffing to support a longer and more intensive yield campaign.
These are not anecdotes. These are the prevailing “true facts” we see in MARKETview.
What the Data Shows
There are ways for institutions to become more efficient. Colleges can refine name purchases—we help them do that. They can also leverage predictive analysis to focus resources on the most yieldable students.
But the data we see in MARKETview points to a clear reality:
To reach enrollment goals—particularly for institutions choosing to grow enrollment—it typically takes about 150% of current inquiries. That figure holds regardless of improvements in programs, reputation, or pricing strategies. It is the baseline reality from which enrollment budgets must be built.
Investing to Compete
If a college funds its enrollment program competitively and executes tactically to competitive standards—all measurable in MARKETview—then achieving enrollment and revenue targets is possible. Without such an enrollment program, however, institutions should expect more difficult budgeting cycles ahead. And notably, all of this analysis comes before even factoring in AI.
AI may eventually help institutions reduce administrative costs and could even drive families to seek the social and developmental benefits of residential college communities—real human interaction as an antidote to an increasingly artificial and virtual world.
The Fiduciary Risk of Cutting Enrollment
For now, however, one conclusion is clear:
Across-the-board budget cutting—where every unit shares the same proportionate reduction—can create serious strategic risk.
If enrollment programs are prevented from deploying the resources and tactics necessary to compete effectively, institutions may unintentionally ensure declining student consideration. At that point, the problem is no longer simply operational.
It becomes a fiduciary issue for trustees.
Fiduciary responsibility, at its core, means ensuring that an institution’s revenues and expenses remain aligned so the enterprise can sustain itself over time. But that responsibility is not fulfilled simply by cutting budgets. When institutions reduce enrollment investment—without confidence that the remaining program can expand the size of the funnel and improve conversion within it—they risk undermining the very revenue engine that funds the institution.
In that situation, balancing the budget through reductions to enrollment spending may not represent fiscal discipline at all, but rather a failure to meet the board’s fundamental fiduciary obligation to ensure the financial well-being of the institution.