The College "Enrollment Cliff" Isn't a Cliff-It's a Slow Financial Slide
Dr. Dick Startz, an education economist at the University of California, Santa Barbara explores the financial reality facing America's colleges-from the "no cliff, but a downhill slide" demographic shift in 18-year-olds, to the sudden drop in international students and what that means for tuition revenue, and to changing federal support affecting research and student aid.
Jeffrey Snyder, Broadcast Retirement Network
Joining me now is Dr. Dick Startz. He's an education economist with the University of California, Santa Barbara.
Dick, it's great to see you. Thanks for joining us in the program this morning. Thank you for inviting me.
I'm looking forward to it. Yeah, I'm excited about this because I, and maybe we'll do a level set question first before we get into the AI discussion. So let's talk about the financial state of America's colleges, whether they are, you know, the Ivy League schools, the community colleges, how are America's colleges doing from a financial point of view?
Dick Startz, PhD., University of California, Santa Barbara
You know, that's, the way you phrased that is really perfect because the answer is it depends which college. So everybody at the moment is under some financial stress, but if you're Harvard with billions and billions and billions of endowment, you know, you're going to manage fine. On the other hand, there are some places that are closing.
There are a number of places that are at no risk of closing, but are cutting back on programs and majors. And on the pure financial side, there are several big challenges. And the big one is really easy to understand, which is just the demographics of the population.
We've hit about peak number of college students probably this year. Going forward across the country, the number of college students is going to, I'm sorry, the number of 18 year olds is going to fall about 1% a year. That's not huge.
People keep using the term enrollment cliff. There's no cliff, but it is a downhill slide. And there's nothing magical about this.
I mean, if you want to know how many 18 year olds there will be 15 years from now, count the number of three year olds. That kind of pretty much tells you. So some places like Harvard, like UC Santa Barbara, where I am, are not going to be affected by this at all.
But there are a lot of small places that are entirely dependent on tuition dollars and enrollment. And at some point, some of those are going to be in trouble. The second thing that has happened is there's been a sudden noticeable drop in the number of international students.
And something a lot of people don't understand is international students typically pay much higher tuition than domestic students do. That's because at public schools, they're always paying out of state tuition. So in California, for example, the University of California, international students pay something like triple the tuition that California residents pay.
And everywhere, international students get very little financial aid. So half of California students at University of California actually pay zero tuition because they get a lot of financial aid, whereas the international students just don't get any. So the dramatic drop in international students, some places, that's a real problem.
Others don't have many international students, and they're fine. Then the third piece, which is just much harder to know how big it is, how long will it last, is the federal government has been cutting back on research funds, doing some things with Pell Grants and things like that. And these things affect different colleges very differently and different parts of the colleges very differently.
So there are some real concerns about all of this.
Jeffrey Snyder, Broadcast Retirement Network
So it sounds like there's a confluence of factors that are kind of, and this is not new. I mean, this has been going on. This is not, didn't just happen today, the day we're talking.
This has happened year over year.
Dick Startz, PhD., University of California, Santa Barbara
So there's definitely- Well, confluence is exactly right, but some of this stuff actually is new. So the number of college age students has been rising gradually, and now it's going to start going down. That's not a surprise.
We've known that would happen, but actually going down is sort of on the new side. The drop in international students is actually very new. So it turns out that one of the most successful exports the United States has, in terms of just dollars, is higher education.
And we're the leading place in the world where people have wanted to come for higher education, and we have real competition in that. And all of a sudden, government policies are cutting back some of that. And of course, the research dollars is very new, and we don't know yet whether that's a really, really big thing, or it's not such a big thing, or what's going to happen.
But the confluence is a great word to describe what's going on.
Jeffrey Snyder, Broadcast Retirement Network
Well, you're the expert, and I will certainly accept the distinction. Thank you for the correction. So let me ask you about a couple of things.
Let's start with artificial intelligence, because you can't go a day, a minute, really, if you're checking your phone or looking at the news, where AI isn't somewhere in a story. And I have to think, AI is impacting the private sector. It's changing the way a lot of people do business.
It's changing not-for-profits. How is AI changing or being implemented in the education sector of the economy?
Dick Startz, PhD., University of California, Santa Barbara
There are big ways that we don't entirely understand. I think that's probably true in lots of places. Let me start with one that's really big for faculty at universities, but isn't anything very deep, which is, all of a sudden, figuring out how to give students assignments and grade them has gotten really hard.
For lots of what we do, we don't really want to give students a paper-and-pencil test. We want them to go do a project or write a paper. Well, all of a sudden, because there's a bunch of that stuff the AI can do, and the students are quite good at using AI, we can't do that.
So there's this huge move back to what people, certainly my age, will remember, which is the way you get a grade is you go into the lecture room, and you have a blue book and a pen, and you write out answers.
Jeffrey Snyder, Broadcast Retirement Network
I remember. Hey, look, I'm old enough to remember that too, doctor.
Dick Startz, PhD., University of California, Santa Barbara
Okay, so it's not a good thing, but nobody has figured out very much how to get around that. Now, let's go back to the other end, the one that's really interesting. What do colleges always kind of want their mission to be?
Well, there's lots of things, but we want to teach students to be knowledgeable, analytic, be able to communicate, all the things that make you a really good citizen, but also make you a really good employee. Well, those things, AI may actually make more valuable. The problem is lots of the things that we sort of teach on the way and that students have taken away are, you might have a lot of detailed knowledge.
Maybe it's about accounting rules or things like that. Well, things that can be laid out very objectively, all of a sudden AI can replace people at. So a lot of what colleges actually do may become less valuable, whereas the big picture mission we all want to be doing, I think will become even more valuable.
So let me give you an example, and I think it's the one that's gotten a lot of attention. If you go back more than like two years, the hot major everywhere has been computer science because the demand for coders was huge, and that appears to have completely collapsed. And that's because entry-level coding, the AIs can do fantastically.
However, from the people I've talked to, senior software engineers are even more valuable than they used to be. It turns out senior software engineers don't spend, they spend 10, 20% of the time actually coding. They spend their time organizing, arranging, talking to people about what people need, checking whether code works, things like that.
And that's enhanced by AI. So the disruption is that it's looking like there's sort of big changes in exactly what skills are really valuable. Some are much more and some are much less, and colleges just, we don't move very fast.
So that is an issue that places are going to be facing.
Jeffrey Snyder, Broadcast Retirement Network
Well, let me ask you about, you bring up a really good point. So I was going to ask you about the right major, but let me ask you a different question, which is, I've been reading a lot about the trades. So iron workers, carpenters, electricians, AI doesn't seem like it can wire a house for electricity.
Maybe I'm wrong, maybe not yet. So could colleges and universities pivot and partner with some of the trade association, excuse me, like the iron workers, the unions, I should say, and try to train the future workers, the trade professionals, I guess.
Dick Startz, PhD., University of California, Santa Barbara
So yes, in part. So I don't know if everybody understands, but this has always been one of the missions of community colleges in particular. I was actually talking a couple of days ago to a contractor who has been teaching carpentry and introductory trades at our local community college.
And he also says, and there's always a shortage of people contractors want to hire. So doing that is probably not a mission for four-year colleges, but it has been a mission for community colleges, some of which do it very well and some of which don't. And I think what you said is absolutely right.
There is no near-term expectation that we're going to be, I mean, we're going to need auto mechanics, we're going to need plumbers, we're going to need all these things. Now, it may be that some of them will want to get some training in using AI as part of their job. I mean, think of another one, think of nursing, right?
We always need nurses. They will keep you healthy and it's a physical job, but it's also a human-to-human job. That's not going to get replaced.
What is true though, is because nurses play an important role in thinking about exactly how to do treatments, they may need to learn more about actually how to use AI to enhance their jobs. So one of the mistakes that the US has made for a long time, everybody should have the opportunity to go to college. Going to college is not only about getting a job, it's about many things in life.
But that doesn't mean everybody should go to college. People should do what fits for them. And for too long, a lot of places have sort of put down the idea of getting a trade or something like that.
And if the advent of AI helps us reintroduce more respect for people who work with their hands and things like that, that would be a good outcome.
Jeffrey Snyder, Broadcast Retirement Network
So we've got about a minute and a half, two minutes left, doctor. Let me ask you, you mentioned, I don't think it's uncommon when you look at all the industries, but when education moves, quote unquote, slower, does this then the most, I would say, I come from the retirement industry, doctor, and I can tell you it's glacial. I mean, there have been ice ages that have moved faster.
But in all seriousness, does AI create the impetus to move faster? Because if you snooze, you lose, your school, unless you're one of these big endowment fund schools, could pop, could go away quick. So does that actually help move things along quicker to respond to the needs of people looking to figure out where they want to be in life?
Dick Startz, PhD., University of California, Santa Barbara
Let me give you a really, really inadequate answer. I sure hope so. So in the fall, I'm going to teach a freshman seminar course called AI in economics.
And we'll see how it goes. Everybody's talking about AI. My university has a new major in helping build AI.
I hope that colleges will respond and respond as quickly as we can manage and thoughtfully.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. Well, I guess it's like every other sector. Like I said, I think education is unique in terms of what it does, but like every other economy or economic sector, it is adjusting to what's happening.
It's adjusting to the financial landscape, but also to the technological landscape. Dr. Starch, we're going to have to leave it there. It's great to see you.
Thanks for joining us. And look, we look forward to having you back on the program again very soon.
Dick Startz, PhD., University of California, Santa Barbara
I look forward to it.
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This story was originally published July 18, 2026 at 5:30 AM.