More Gen Zers could ditch college this fall — and some schools are worried they might never fully recover

• A college enrollment crisis is likely coming this fall.
• It's a result of complications with the FAFSA form, along with a lower supply of high school seniors.

High school graduates aren't going to college like they used to.

Katharine Meyer, a fellow at the Brown Center on Education Policy at the nonprofit Brookings Institution, told Business Insider that colleges are "very worried."

Over the past decade, a range of challenges have hit higher education: More jobs have become available in the past few years that don't require college degrees, Gen Zers have started to rethink whether the degree is worth the student debt, and, of course, the pandemic prompted some students to press pause on college or even drop out.

Overall enrollment for 18- to 24-year-olds declined from 41% in 2010 to 38% in 2021, according to the National Center for Education Statistics. While enrollment saw a resurgence following the pandemic, per the National Student Clearinghouse — undergraduate enrollment grew 1.2% in fall 2023, and freshman enrollment grew 0.8% — trouble could again be on the horizon.

The immediate concern for colleges and students is the Free Application for Federal Student Aid, or FAFSA, form. The Education Department announced last year that it was overhauling the form to make it easier for parents and students to access, but at the outset, the form's rollout was delayed. There were errors with some aid calculations, forcing some schools to push back their commitment deadlines to allow for more time for students to evaluate their award packages.

The delays and errors have meant fewer students are completing their FAFSA forms. According to the National College Attainment Network, 32.9% of high school seniors have completed the FAFSA through April 19, down 29% from the last academic year.

Based on how a drop in FAFSA submissions during Covid impacted enrollment in the fall of 2020, that's a pretty good indicator that college enrollment will be much lower this fall, MorraLee Keller, senior director of strategic programming at NCAN, told BI.

"At the rate that FAFSAs are being submitted this year, we can project out, unless something major happens, maybe a 10 to 15% drop in FAFSAs," Keller said, though she emphasized that there's still time for students to apply for financial aid if they haven't yet.

But it's not just the FAFSA. There's also a limited supply of high school seniors right now due to lower birth rates during the Great Recession. With a growing number of young people questioning the value of a college degree, enrollment-dependent institutions could suffer financial setbacks — or even shut down.

"I think all colleges are worried," Meyer said. "They're worried on different margins. Even the large institutions, the well-resourced institutions that have large endowments, they're still worried about getting their students through the door."

Students could face lasting setbacks

Most of the FAFSA issues will likely be resolved by this time next year. But some of the delays in early 2024 could have lasting implications. For example, enrollment is still down from pre-pandemic levels, which indicates that if students do not enroll this year due to issues accessing financial aid, they might choose never to enroll down the road.

That would mean that not only will colleges miss out on some graduating high school seniors — but they could also lose currently enrolled students who are forced to drop out because they could not navigate the financial aid system.

Meyer said this especially applies to "students at community colleges or less well-resourced four-year institutions where they're not able to get in touch with somebody to process financial aid."

"The institution doesn't have the ability to do some of the workarounds that other institutions are doing, and we'll see that retention rate go down as well," Meyer said.

FAFSA issues hit low-income families the hardest because they don't have the resources to assist them with the process, and they could lose out on higher education altogether because of it.

"We have across-the-board impact this year," Keller said. "There's so many less FAFSAs in that it's obviously affecting everybody. But the families that need the aid absolutely to pay for school have to be the largely impacted group."

Colleges will be forced to adjust — or shut down

It doesn't help matters that there's also a lower supply of 18-year-olds. The national birth rate declined by nearly 23% from 2007 to 2022, falling at a quicker rate right after the Great Recession.

Meyer said that colleges have been aware of this enrollment dip for a while, and said colleges have two options: convince more high school graduates to enroll or entice older adults back to school.

"Universities are thinking about this as more of a business model and thinking about how do they sustain enrollment so they could stay open," Meyer said. "And so those are sort of the numbers games of enrollment efforts."

However, enrollment declines have already stunted financial growth at some schools. Hodges University — a private Florida school — announced in August 2023 that it would be shutting down in 2024 due to enrollment declines "despite continuous efforts to adapt to changing educational landscapes and provide innovative programs."

Cazenovia College, a private school in New York, shut down in fall 2023, citing financial challenges from the pandemic and that "the population of college-aged individuals had been shrinking."

Meyer said she expects "there will be more closures than usual this year, particularly among these small, private liberal arts colleges."

Beyond that, as BI previously reported, 46% of Gen Zers don't think college is worth the cost, according to a July BI/YouGov survey — meaning colleges will have to put in the work to show that degrees from their institution will pay off. Some schools, like the Texas community college system, are already doing this by working to implement a school structure with funding based on student outcomes.

But the immediate enrollment shock will likely come this fall — and both students and colleges will feel the impact.

Are you a recent high school graduate not going to college? Share your story with this reporter at asheffey@businessinsider.com.