Redefining ROI in Higher Education
Insights from Baird’s Private Company Technology & Services Conference
The state of higher education is more nuanced than headlines might suggest. While institutions are facing tough challenges, compelling opportunities are also emerging in the sector. At Baird’s Private Company Technology & Services Conference, our Global Investment Banking team convened a panel of industry experts to delve into the current higher education landscape.
Hosted by Dan Alfe, Managing Director, and Dennis Schwartz, Director, in Baird’s Knowledge Solutions group, the panel was moderated by Kate Kruger and Seth Reynolds, both Principals with EY-Parthenon. The discussion featured perspectives from Joe Diamond, CEO of AllCampus; John Fillmore, CEO of Podium Education; and John Katzman, Founder & CEO of Noodle.
Key Takeaways
- While Demographics are Shifting, Demand for Higher Ed is Holding…
The population of 18-year-old high school seniors transitioning to college is set to decline, albeit modestly. Older and less “traditional” students opting into college will offset the decline. “Only about a third of the entire higher ed enrollment is below the age of 25,” said Kruger. “This is a very real threat that is happening in the industry, but the actual size and magnitude of the change is relatively modest.”
What’s more, college-going rates for high school graduates are actually on a slight rise, totaling 58% in 2024 (the most recent available IPEDS data). This level outpaced the pre-pandemic rate seen in 2019, showing students are still seeking out higher education. Overall, the EY-Parthenon team expects enrollment to remain largely flat over the next five years. - …But Increased Supply Presents a Growing Challenge.
The rapid expansion of online learning was jumpstarted by the pandemic. “You basically grew supply infinitely,” said Katzman. In turn, competition is more intense and the need to differentiate and effectively market those offerings more acute. “As the more elite schools come online and, in part driven by the administration’s push on research dollars, they need tuition dollars, you’re driving up cost of acquisition considerably. And the schools with smaller brands, the schools that aren’t as competent really have an existential threat.” - Institutions are Finally Moving to Answer, “What’s the ROI on a college education?”
The value proposition for college is shifting, in no small part due to students’ shifting expectations. The panel emphasizes today’s importance of cost, convenience and career outcomes to today’s students. As Reynolds shared, “Institutions are finally, in my view, coming to the realization that they need to sharpen the value proposition.” Career readiness is a key theme for institutions of all sizes. “Every department across the university is told, ‘If you’re not adding value to how our students are getting ready for their careers, you’re not part of our future plans. That, I think, is massively different than even 10 years ago,” Fillmore remarked. - Institutions Need Different Services and Strategies to Compete
The shifting higher education landscape is also changing institutions’ needs for services and external partners. “Markets like retention marketing, enrollment marketing, enrollment support analytics, career experiential learning and career services more broadly – those are markets where we're seeing growth in vendors, deal activity and lots of demand from institutions,” Kruger highlighted.
Service strategies are no longer optional for universities. The panel agreed higher education is beginning to turn to outside partners with domain expertise (and invest in those services). “[Universities] spend a tremendous amount of time and effort driving top-of-funnel awareness… nobody else selling $100,000-plus goods, spends as little love for their prospects as higher ed does,” Katzman shared. The panel agreed differentiation is critical for universities, with students expecting strong ROI. Service providers are applying a similar mindset to potential clients. “There needs to be some reason that someone is choosing the degree, something that’s ideally a value back. We basically will turn away things if we don’t think there’s a high ROI for the student taking the degree. We’ve turned away several partners for that,” said Diamond.
Baird’s Knowledge Solutions Investment Banking Team
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