America is nearing a “demographic cliff” as the sharp decline in 18-year-olds threatens higher education and the economy

Pickup trucks with trailers and cars with yawning trunks pulled up onto the lawns of Iowa Wesleyan University. People loaded books, furniture, and artwork—whatever was left after an auction company sold off anything of real value. One of the buildings was already marked for demolition, its red-brick walls set to be discarded into its 1921 foundation. This was the unceremonious end of a 181-year-old institution that shut its doors in 2023 after years of financial struggles.

“All the things that are mementos of the best four years of a lot of people’s lives are sold to the highest bidders,” said Doug Moore, who has overseen the liquidation of four colleges, including Iowa Wesleyan. The tragedy of college closures is becoming more common, and the data suggests it’s only the beginning. The number of high school seniors—the lifeblood of colleges—is about to plummet.

The Looming Demographic Cliff: How Declining Birth Rates Threaten Higher Education

This demographic cliff has been looming since the Great Recession of 2007. Americans had fewer children, and birth rates never recovered. The Centers for Disease Control now confirms that 2025 marks the start of this decline. College recruiting offices will soon face a dwindling pool of applicants, while the economy will suffer from a severe lack of skilled labor.

demographic cliff has been looming since the Great Recession of 2007.

“The impact of this is economic decline,” said Jeff Strohl, director of the Georgetown University Center on Education and the Workforce. Fresh data from Ruffalo Noel Levitz projects another major drop in the number of 18-year-olds by 2033, with 650,000 fewer students per year by 2039. The Western Interstate Commission for Higher Education (WICHE) reports that the number of high school graduates will fall by nearly half a million by 2041.

Economic Impact of College Closures: Job Losses and Shrinking Labor Markets

A 15% drop might not sound like much, but over a decade, the consequences are massive. The U.S. already lost 2.7 million college students between 2010 and 2021. In 2024, more than one college per week announced its closure, and the Federal Reserve Bank of Philadelphia warns that this pace could accelerate. Last year, 21 institutions defaulted on municipal bonds—nearly matching the total defaults of the past five years combined. Fitch Ratings now categorizes the higher education sector as “deteriorating.”

For students, this could mean a buyer’s market. Colleges are admitting a higher proportion of applicants, and inflation-adjusted tuition is falling, according to College Board. But the economic impact of college closures is devastating. Nearly 4 million people work in higher education, and each shuttered college eliminates about 265 jobs and $67 million in economic activity, according to IMPLAN.

“It’s a problem for our country,” said Catharine Bond Hill, an economist and former president of Vassar College. The U.S. has slipped to ninth among developed nations in the proportion of people with postsecondary education, according to the OECD. “We should be aiming for Number 1, and we’re not,” she added. “In an economy that depends on skilled labor, we’re falling short.”

The labor market is already suffering. Lightcast warns of a “massive labor shortage” with six million fewer workers than needed by 2032. By 2031, 43% of jobs will require at least a bachelor’s degree, but current education trends show that America won’t produce enough graduates. Georgetown’s ongoing research predicts shortages in teaching, healthcare, and 151 other occupations.

“If we don’t keep our edge in innovation and college-level education, we’ll have a decline in the economy and ultimately a decline in the living standard,” Strohl warned. The effects are already visible—McKinsey reports that a shortage of skilled labor is delaying a $40 billion semiconductor plant in Arizona.

The last time the U.S. saw a worker shortage this severe was after World War II. But this time, it’s happening alongside a wave of retirements from experienced baby boomers. “We have a lot of people moving from economic producers to economic consumers, and there just aren’t enough people coming up behind them to replace them,” said Luke Jankovic of Lightcast.

The number of high school graduates is falling fastest in the Northeast, Midwest, and West. WICHE estimates declines of 32% in Illinois, 29% in California, and 27% in New York. “Institutions that continue to rely on the traditional undergraduate market to pay the bills are going to be in trouble,” said Scott Jeffe of Ruffalo Noel Levitz.

Shifting Demographics: Rising Hispanic Enrollment and Declining College Perception

America is nearing a “demographic cliff” as the sharp decline in 18-year-olds threatens higher education and the economy
Image Credits – WTF Detective

Hispanic students will make up a larger share of high school graduates—rising from 26% to 36% by 2041—but their college enrollment rate is below the national average. Meanwhile, the proportion of Americans who see a college degree as essential for a good job has collapsed.

Pew Research Center found that fewer than one in four people now believe a bachelor’s degree is very important. In 2016, 70% of high school graduates immediately enrolled in college; by 2022, that number had dropped to 62%.

“The sector continues to fight against that narrative that it’s out of reach from a financial perspective and that it’s not worth it from a value perspective,” said Emily Wadhwani of Fitch Ratings. “The only thing then that will promote stability in the sector again is a renewed sentiment that it’s worth it.”

Some have hoped that international students, older students, or graduate programs could help colleges survive. But international student enrollment fell 12% during Trump’s first term, and a survey by Keystone Education Group shows that 58% of European students are now less interested in studying in the U.S. Meanwhile, the number of students over 25 has dropped by half since the Great Recession, and graduate school enrollment is also down.

Back at Iowa Wesleyan, the campus is in ruins. The old gym was stripped and demolished, its cornerstone—a symbol of the college’s founding in 1842—left among the rubble. “In so many of these towns, their identity is inextricably linked to the college that’s been there forever,” said Doug Moore. “It’s a huge source of local pride. It’s also a big source of good-paying jobs that are not replaceable. It is brutal and painful.”

More colleges will go under the auctioneer’s gavel. More campuses will fall to the wrecking ball. “You have a staggering number of variables,” Moore said. “It’s supply and demand. You’ve got to evolve and adjust or die.”

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