When demand for their product or service declines, private organizations react by downsizing or closing. But public sector entities often fight for survival by creating artificial demand. Such is the case in the world of higher education.
Due to decreasing fertility and immigration, the supply of students and consequently the demand for college is starting to fall. According to the Department of Finance, the number of California high school graduates peaked at 454,768 in 2024 and is expected to decline to 362,165 by 2043. This decline is mostly baked in since 2043 graduates are being born in 2025. It would take large scale family in-migration to turn this trajectory around, but, given California’s high cost of living, such a development is unlikely.
Colleges in California could offset the decline with foreign students, but the Trump administration is deterring them from coming. The federal posture might change after 2028, but birthrates have also been falling in countries that supply us with international students.
During the first half of the 2020s, seven private, nonprofit colleges closed and economists at the Federal Reserve Bank of Philadelphia expect an acceleration of closures nationally as the demographic cliff takes hold.
But no such retrenchments are in the works for California public universities. Admittedly, none are needed at the University of California, the state’s premium product which continues to attract strong interest. But the situation is different at some California State University campuses and Community Colleges.
Between 2018-19 and 2024-25, Sonoma State University saw a 31% enrollment decline, while Cal State Channel Islands in Ventura County lost 23% of its students. During the same period, both San Francisco City College and Siskiyou Community College District lost more than one-third of their students. Overall reported enrollment across the California Community College system was stable but recent data is questionable due to millions of fake registrations by fraudsters hoping to steal financial aid funds.
Rather than shrink the CSU and CCC systems, legislators and education leaders have a different strategy: get more students to register. Indicative of this approach was this year’s Senate Bill 640 signed by Governor Newsom in October. SB 640 grants automatic admission to 16 CSUs to any California high school graduate with at least a 2.5 GPA: no applications, essays, or standardized test scores required.
But is lowering the bar for university admission the right approach? The answer from public higher education advocates is yes because college is the key to success.
According to Census statistics for 2024, median earnings for those with a Bachelor’s degree or higher were $91,250, which was 80% higher than the $50,640 median earned by those with a High School Diploma, and no college. Citing similar statistics, researchers at the Public Policy Institute of California conclude that a CSU education is a good investment, especially given its relatively low tuition.
But this conclusion comes with multiple caveats. First, to get that earnings bump, students need to complete their degrees and possibly go to graduate school. But only 62% of CSU freshman graduate within six years. Policies that encourage more students to enroll are likely to attract young people less dedicated to education and thus more likely to drop out.
As the PPIC researchers admit, there is substantial earnings variability across fields of study. This is backed up by CSU’s own earning statistics. They show overall median earnings of $88,128 ten years after graduation. For engineering majors, the median is over one-third higher at $120,952. But Anthropology majors earned far less: only $66,583 ten years after graduation. Other Humanities and Social Science majors also earned well below the CSU median. Some of these students are not much better off than they would have been had they not attended college. Indeed, the Federal Reserve reports that 56.5% of Liberal Arts graduates are underemployed, meaning that they are working in jobs that typically do not require a college degree.
Going forward, even some of the highest earnings majors could be jeopardized by AI. While CSU statistics show Computer Science majors earning $132,894 ten years after graduating, more recent CS graduates are facing above-average unemployment rates which could well become worse as AI displaces more programming jobs. Meanwhile, many employers including the State of California itself are dropping college degree requirements for many roles.
So, there is no guarantee that making it easier to get into public colleges will lead to greater student success. Instead, it could result in many young people wasting time in class rather than earning money and getting practical experience. Rather than lowering the bar, California public higher educational institutions should consider selective mergers while maintaining their standards.
Marc Joffe is a visiting fellow at California Policy Center.