The Road Ahead: A Changed Market for Higher Education

The Renew Rensselaer team endeavors to provide insights into and understanding of the challenges RPI will likely face in the coming years. Our purpose is to inform alumni and – hopefully – motivate them to increase their level of engagement. We believe this requires strengthening the relationship between the Institute and alumni, and we are optimistic the new administration will make this a high priority. Once we see clear indications that principles of shared governance are being restored and signs of progress toward adopting the remaining parts of our platform, we will assume an even more active role in fundraising and encourage all alumni to do the same.

The Competitive Environment in Higher Education

As with all high-quality universities, RPI’s ability to maintain its brand value and effectively compete for top students is critical to its long-term success. Given the Institute’s low ratio of endowment per student relative to that of Ivy League and other top-tier private universities, and the dynamics of pricing in the higher education marketplace, it will be imperative for alumni to increase their support for the Institute in the near future. Higher education is facing several challenges impacting the economics of operation. Many institutions are being adversely affected and, in some cases, their long-term independence and survival are at risk.

We believe RPI has an essential mission serving the needs of society for high-quality graduates in science, engineering, architecture, business, and other fields of endeavor. However, it is not alone in this mission. Over the long-term, RPI must maintain and enhance its strong brand and name recognition – the key elements for driving student demand for an RPI education and the prosperity of the Institute. In the following sections, we seek to provide you with an overview of two significant, long-term trends shaping the market for higher education, as well as how RPI has responded to them. We conclude with recommendations for how the Institute could best adjust its policies in order to stimulate alumni support and ensure its enduring success.

A Shift in Balance of Supply and Demand

Diminished Pricing Power – In May 2019, the National Association of College and University Business Officers (NACUBO) published the results of its 2018 study of price discounting by private colleges and universities. The data shows that the average tuition discount rate for all undergraduates rose steadily each year, from 34.7% in 2008 to 46.3% in 2019. In its report, NACUBO cites recent polls indicating many Americans believe college has become unaffordable and colleges are willing to discount tuition and fees in order to keep a college education within reach. The Chronicle of Higher Education (CHE) published an article1 in May 2019 highlighting the views of a vice president for enrollment at a well-known private university, who acknowledged an attitudinal shift of parents and students. This shift reflected feelings that college had become too expensive and a willingness to select a university on the basis of price rather than a preferred experience. Similarly, in a February 2020 article2, a former CHE editor related how he had several students from wealthy high schools tell him “their parents might be able to pay the full tuition bill, but they didn’t want to.” This data and anecdotal evidence indicates a significant shift in the character of demand for college since the Great Recession. The economic stresses caused by the SARS-CoV-2 pandemic have only added to the competitive pressures within the higher education sector.

Shrinking Supply of Students – Since 2011, there has been a leveling-off of the growth in supply of new high school graduates seeking to enter college. According to the 2018 Western Interstate Commission for Higher Education study, “Knocking at the College Door,” the growth rate in the number of graduating high school students began to slow significantly around 2011-2012, following a 15-year period of rapid growth due to the demographics of the Millennial Generation. In the 2020 edition of the Knocking at the College Door report, the data and chart show the slowing rate of growth went completely flat in the 2019-2021 period.

The report forecasts five years of moderate growth from 2022 to roughly 2026, followed by a sharp decline (the so-called “demographic cliff”) with a continued gradual decline until 2037. The net effect of these supply and demand shifts has turned the competitive environment in higher education from a seller’s to a buyer’s market, one which is expected to continue for the foreseeable future.

The College Stress Test3, a book published in 2020, characterizes the college marketplace as a “Winner Take All” environment, holding that “there is every reason to expect the next decade to bring more of the same, as the rich get richer and the big get bigger.” In addition, the book provides a framework of analysis for gauging the likely winners and losers. The authors define the top two brand segments as medallion brands and name brands†† with a national reach (see Definitions below). Their premise is that these schools will do well in this environment, provided they have the financial strength to sustain their brands and rankings. The authors contend that top schools will apply their market and financial strength to seek revenue from enrollment growth as a substitute for the price increases of the past. The authors add, “The institutions least likely to experience market stress are those at the top of the pecking order. Those are the institutions with the status and prestige, along with the financial resources, to buck the headwinds generated by a public unhappy with the direction and quality of the enterprise.”

RPI’s Response to the Changing Market

RPI has been well-positioned in the post-2008 market by virtue of being a STEM university with a strong brand. It has benefited greatly from the surge in demand for undergraduate STEM degrees following the Great Recession. Application growth has been strong, including from areas beyond the Northeast region. The Institute has also increased its draw of international students, raising its percentage of undergraduates from 11% to 21%, over the past decade. In the more competitive environment for research revenues, which began around 2012 following federal cutbacks, the Institute has succeeded in significantly ramping-up total undergraduate enrollment and related revenues. However, it has not been immune from the trend of increased discounting of tuition and fees (and the decrease of its inverse, net market pricing). Furthermore, the SARS-CoV-2 pandemic and its associated economic impact have introduced several new risks to the levels of enrollment for all colleges and universities, as online learning was broadly employed and proven effective during the pandemic, thus providing a new option for some students.

In The College Stress Test, the authors describe four key metrics for determining whether a college or university is successfully competing or is financially at risk:

  1. Trend in first year enrollment growth;
  2. Level and trend of student retention (from first year to second year);
  3. Trend in net market pricing of tuition and fees, and;
  4. Level and trend of the ratio of endowment to annual operating expenses.

The first three metrics are measures of results from ongoing operations reflecting the supply/demand balance for students. The fourth is a combined measure of the financial resources available to sustain (and potentially improve) those results and degree of control over the growth of operating expenses.

We performed the stress test on RPI, which involved examining eight years of historical data (FY 2012-19), computing the trend, and then extending it out three years before comparing the result to statistically predetermined “alert” and “warning” thresholds. The results of the tests are described below, and detailed in the spreadsheet we built for the analysis. (Note: we have updated our work with more recent data, but the results are distorted by the impact of the pandemic).

1. Enrollment Growth: Positive trend
2. Student Retention: Stable (positive result)
3. Net Market Pricing: Negative trend
4. Endowment to Op. Exp. Ratio: Positive trend (but at a low absolute level)

RPI does very well on the tests for the first two metrics (enrollment growth and student retention), but not as well on the tests for the third (net market pricing).

The trend for the fourth metric (ratio of endowment to operating expenses) is slightly positive, in large part because the Institute has maintained tight control of its operating expenses. However, the most recent absolute level of the ratio is of concern, at 1.7x. In The College Stress Test, the authors indicate that a generally accepted healthy range for this ratio is between 2.0x and 3.0x.


The ability of an institution to compete in the higher education sector, even for the schools in the top two brand segments, is dependent upon having the necessary financial resources; specifically, strong cash flow from operations coupled with a sufficiently large endowment, in order to maintain and enhance its brand. RPI has improved its operating cash flows in recent years, and the value of its endowment has slowly crept higher due to strong financial markets. However, we believe that neither is presently sufficient for ensuring long-term success. The competitive pressures in the higher education sector are formidable. Continued success will require a combination of strong administrative leadership, renewed policies of shared governance for engagement with students, faculty, and alumni, and strong financial support from alumni.

The Role of Alumni Financial Support

We have endeavored to provide an overview of the key challenges ahead for the higher education sector, and specifically for RPI. Our research and analysis point to the conclusion that the competitive vibrancy of RPI can best be ensured with greater engagement of its alumni, specifically their contributions of time and financial resources. With the right mix of leadership, shared governance, and alumni participation, we can enable the Institute to invest in faculty, facility upgrades, and other areas that will build and enhance the strength of the RPI brand. For these reasons, we continue to recommend to the RPI Board of Trustees that it adopt and implement the remaining points of the Renew Rensselaer Platform.


Medallion brands: the segment comprising the nation’s most competitive institutions and students; the segment for which prestige-based ranking plays a substantial role in defining institutional ambitions and quality.
††Name brands: the segment largely populated by well-known institutions. Most practice selective admissions, though their appeal is more likely to be regional than national. Many, but not all, of these institutions would like to be medallions.


1Kelderman, Eric. “Enrollment Shortfalls Spread to More Colleges.” The Chronicle of Higher Education, May 20, 2019.
2Selingo, Jeffrey J. “Colleges Need to Rethink Their Market — and Maybe Their Mission.The Chronicle of Higher Education, February 20, 2020.
3Zemsky, Robert, et al. The College Stress Test : Tracking Institutional Futures across a Crowded Market. Baltimore, Maryland, Johns Hopkins University Press, 2020.