Where have all the students gone?

Huge thanks to my colleagues Haven Ladd , Rebecca Mitchell , and Sam Wolfson , for writing this post with me.

Where have all the students gone?

The US public pre-K-12 school system has lost ~2.6% of students since SY20. Where have they gone, and will they come back?

After experiencing nearly 30 years of steady ~1% year over year growth from SY90-20,[1] the US pre-K-12 public school system enrolled ~51m students by SY2020. By SY2022, ~1.3m had disappeared from the enrollment numbers,[2] with even more disappearing from public district schools (vs. public charters). This enrollment decline raises critical questions for states and school districts, as well as for companies providing products to the pre-K-12 space. How much of this decline is related to the short-term impacts of COVID-19 and how much is structural, which will need to be planned for over years to come? Are enrollment declines likely to persist and, if so, what will be the impacts on districts and the companies that serve them?

?The EY-Parthenon team analyzed secondary research and data available from the National Center for Education Statistics (NCES), the Centers for Disease Control and Prevention (CDC), the US Census Bureau and the Congressional Budget Office (CBO). We also conducted interviews with state and district stakeholders to better understand the nature of the recent decline in enrollment, future expectations for enrollment, and explore key questions and implications for states and districts and companies serving K-12 districts going forward.

Recent declines in enrollment have not been uniformly distributed

The 1.3m student decline represents a ~1% decline in pre-K-12 public enrollments on average, but this decline varied greatly state and grade.

1.????By state: 43 states experienced enrollment declines over SY20-22, with variation by state: Oregon, New York, Kentucky and Mississippi experienced the greatest declines of +5%.[3] State level changes in enrollment over this period were not closely correlated with demographic changes such as changes in birthrates.

Figure 1

2.????By grade: Elementary grade levels experienced much steeper declines in student enrollment than middle or high school grades (Figure 2), with highest declines occurring at the pre-K level of (11)%. Similarly, these declines outpaced demographic changes, suggesting that there is more at play than declining birth rates.

Figure 2

COVID-19 disrupted typical enrollment patterns

Birth rate declines appear to account for approximately 25% of the pre-K-12 enrollment decline from SY20-22. But, especially at the elementary level, demographics do not explain everything. Examining differences in enrollment changes by state reveals the significant role of the pandemic: states with higher degrees of remote education in November 2020 experienced more significant declines in enrollment over SY20-22 (Figure 3).

Figure 3

So, where did the students actually go throughout the pandemic? There are several factors at play:

1.????Mix-shift in enrollment:

a.????Charters: Charter enrollment growth rose during the pandemic (with 1.5-2x the number of students enrolling annually between SY20-22 vs. SY10-20[4]), as parents sought smaller class sizes, and, in some cases, more in-person instruction.

b.????Virtual schools: As more families realized that remote schooling could be a fit for their students, virtual schools have seen significant growth. Multiple states have seen enrollment increases in their virtual programs, and the number of districts planning to run a virtual school increased ninefold in SY22 vs. pre-pandemic.[5] Some fully virtual school providers experienced revenue growth of ~25% through the pandemic.

c.????Private schools: While comprehensive data on private school enrollments is limited, anecdotal data, including trends in Catholic School enrollments, suggest that private schools saw an increase in enrollment as a result of COVID-19.

d.????Homeschooling: The country experienced growth in student homeschooling of ~50%-60% pre-COVID-19 to Fall 2020,[6] with many more parents choosing to take their children out of school for health and safety reasons, or choosing to defer the start of their public-school educations.

2.????Domestic migration: While domestic migration does not explain the national decline in enrollment, it did have meaningful localized impacts. Migration patterns within the US, primarily from the Northeast to the South and West, were exacerbated by COVID-19 (with a ~10% increase in people moving per year).[7] The US also saw increased movement from urban areas to more suburban and rural areas, which influenced enrollment declines in major US cities. New York City, for example, saw a net migration out of the city that accounted for a ~4% decrease in the population between April 2020 and July 2021.[8]

Regardless of where these students went, one thing is evident: they, and their families, are opting out of district schools. This raises the critical question of why. Although health and safety played a prominent role during the height of the pandemic, today, families appear to be reacting more to their perception that school districts do not best serve the needs of their children. This perception raises a key challenge for districts, which may need to market and communicate to parents and families in new ways.

K-12 enrollment declines are expected to continue

Some of the drivers of enrollment declines may prove to be more long lasting than others. Depending on how public schools respond, families that migrated to virtual and private schools may return in the future.

However, the structural groundwork for the K-12 enrollment decline — the national birth rate — has little to do with the pandemic and will therefore continue to impact our school system.

From 2008-20, birth rates in the US declined by ~1.3% annually, translating to ~700k total fewer students entering the schooling system from SY2012 up to SY2025.[9] Although the CBO is projecting an increase in births from 2021 onward, the impact of the prior declines will be felt through to at least 2037.

?While net immigration patterns have the potential to offset some of the declines in enrollment driven by birthrates, absent significant immigration policy changes, the impact will likely not be enough to overcome the overall projected decline. The CBO projects a positive average annual net migration of ~270k for pre-K-12 age students from SY2023-SY30,[10] compared to an average annual decline of ~450k pre-K-12 students based on historic declines in birth rates.[11]

Implications for Pre-K-12 stakeholders

Many of the financial implications of the enrollment declines from SY20-22 have not yet been felt because of state or local decisions to hold districts harmless for declines and/or because the federal Elementary and Secondary School Emergency Relief Fund (ESSER) dollars have added significant funding into the system through SY24. As enrollment declines continue, ESSER funding expires and a potential recession looms, districts and states, along with companies serving the public-school ecosystem, will likely need to be strategic about how they address this new reality.

States should consider the following questions and implications:

• Funding adjustments: How might state education budgets and funding formulas need to adapt to support districts in a new enrollment reality, given most states currently use a form of enrollment-based funding?

States with short-term hold harmless policies will need to adjust their funding strategy for longer periods of declines. States may consider implementing resource-based allocation or hybrid models that have smaller portions of funding based on enrollment. If states and districts maintain overall funding levels for schools and per student funding allocations during an environment of enrollment declines, there may be excess funding in the system. Funds may be redirected to address learning loss coming out of the COVID-19 pandemic.

Districts should consider the following questions and implications:

• Short- /medium- /long-term budgeting: If there are continued enrollment declines, how will districts adjust their budgets and prioritize spending with transparency in a tighter fiscal environment? What tools will they leverage to evaluate which types of spending most impact student outcomes?

If declining enrollment translates to a reduction in funding, districts will likely need to decide between cutting budget lines entirely, reducing the breadth or depth of offerings, or pursuing free or cheaper solutions. Districts may need to look for efficiencies in spending to trim costs, while still supporting strong teacher-led instruction. Collecting data to evaluate the efficacy of spending in relation to student achievement will be critical. Additionally, given that the majority of district spend is on teachers and staff, districts will need to think critically about how to make cuts. Although fewer students will in theory need fewer teachers, the impact of learning loss may actually require more teachers and staff (just potentially in different grades or subject areas).

• Adaptation to serve evolving K-12 needs: How can districts adapt their value proposition and offerings to meet the needs of a new generation of K-12 students and parents, including those looking for fully virtual or homeschooling options?

States and districts may need to better understand the evolved needs of their students and parents following the pandemic. Investment in new ways of delivering education, such as modalities and curriculum content can enhance educational engagement and outcomes. District schools may need to truly evaluate how to “compete” for students, which may require significant innovation and use of marketing and communication tools to engage parents.

?Companies serving the public K-12 system should consider the following questions and implications:

• Demonstrated usage and efficacy: Given declines in student performance on standardized tests since the onset of the COVID-19 pandemic, how will companies show that their products and services improve results for students? How will they demonstrate the importance of the product to the school infrastructure or teacher workflow?

States and districts can be focused on funding products and services that are used daily, serve as the platform on which other products sit, and can demonstrate high usage and efficacy in helping students close gaps in reading and math achievement. Conducting studies and research to provide evidence for the impact a company is having may help justify maintaining the product or service in the face of cuts. Data reporting capabilities will likely become increasingly important as districts look to increase transparency around spending and results. Additionally, products that increase engagement with schools will likely rise in demand. Parent communications, high-quality websites, applications, etc., will likely become part of district’s strategies to encourage enrollment.

• Potential alternatives or substitutes for solutions: In the event of lower K-12 funding, what competitors or substitutes might a district consider for a product/service?

Companies that are aware of competitors and their relative positioning can be better prepared to respond to potential threats as districts consider their options. In the short term, this may mean companies investing more in understanding their own value to customers relative to other solutions.

• Pricing models: How would lower K-12 enrollments impact revenue based on current pricing models?

Many third-party providers for K-12 districts contract on a per pupil basis, exposing them to risk from declining enrollments. Shifting to non-headcount-based contracts may ensure more consistent revenue where there are declines in enrollment.

• Products and services for those opting out of public schools: How can a product or service address the needs of students and families who are opting out of traditional public schools?

To the extent that trends toward homeschooling and/or remote schooling options persist, companies have an opportunity to expand offerings to provide solutions to families and nontraditional schools.

• Products and services for districts looking to attract families: How can a product or service help districts to engage with and communicate with the families they need to attract, and ultimately keep, in their school districts?

Many third-party providers are now introducing marketing and communications tools to help districts with this question. It is likely that this will be a continued need for many districts, in a way that it simply has not been in the past.

Conclusion

The answer to the question, “Where have all the students gone?” is a complicated one — but one thing is clear: at least ~25% of the lost students over SY20-22 are not coming back. This means that states, districts and the companies that serve them will soon need to grapple with the impact of this new environment — one where innovation, transparency and results will become ever more important.

?The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

[1] SY20 = academic school year September 2019 to September 2020.

[2] NCES.

[3] Ibid.

[4] NCES Pandey, Erica. “Charter schools boomed during the pandemic,” Axios website, axios.com/2021/09/22/charter-school-pandemic-enrollment-growth.

[5] Diliberti, Melissa. Schwartz, Heather “The Rise of Virtual Schools: Selected Findings from the Third American School District Panel Survey,” The Rand Corporation website, rand.org/pubs/research_reports/RRA956-5.

[6] Newman, Adam. Rosbash, Tanya. “School Disrupted: The Impact of COVID-19 on Parent Agency and the K-12 Ecosystem ,”The cloudfront website, d1hzkn4d3dn6lg.cloudfront.net/production/uploads/2021/05/School-Disrupted-04.21-FINAL.pdf.

[7] U.S. Census; National Association of Realtors/USPS.

[8] Cornell Program for Applied Demographics.

[9] CDC.

[10] CBO.

[11] CDC.