Sector outlook: what to expect in higher education in 2025

Each year we try our hand at predicting the future for higher education – we look back over what happened throughout the previous year, consult our crystal ball of the key drivers that are expected to influence the sector, and formulate our list of key priorities for institutions looking ahead. It’s not a highly scientific formula, but our deep knowledge of the sector puts us in a great position to understand and interpret the challenges and opportunities over the horizon.

Our predictions for 2024 were on the money

The trends we identified as global change drivers have indeed shaped higher education around the world:

1. En-masse elections and geo-political conflict, rising cost of living and economic uncertainties dominate the macro agenda. The swing to right wing policies across the US and big part of Europe have led to further instability for the sector and have pushed higher education further down on governments’ priority list.
2. Reduced flow of international students impacted revenues for universities relying on their fees: Canada, UK, US and Australia have all seen a significantly lower first-time international student intake. This caused further financial trouble for institutions.
3. Increased pressure on institutions to transform their operating models, reduce budgets, increase efficiency and balance competing demands.
4. A digital-first mindset started spreading across the sector as demand for online, hybrid and flexible learning grows.
5. AI adoption was also on the rise, with a significant shift from the binary narrative we had seen before, to institutions and suppliers starting to adopt AI in practical ways.

What’s in store for higher ed in 2025?

More of the same, but much more accelerated

As the first quarter of this century comes to an end, higher education will see more reform and transformation. In the US, the new government promised some radical changes for the sector. In the UK, the government is expected to announce a new reform agenda for universities, focused on efficiency. Australia is starting a new academic year with uncertainty over international enrolments, after offshore student visa applications fell by 40%, even though the student cap bill was rejected in Parliament. And more reforms are still to come, following the Universities Accord. Canada is in a similar boat when it comes to income from international students, as the temporary cap enters its last year, with more changes expected to be announced later this year.

Despite some of the negative headlines in the media, the sector is optimistic about its future in line with Moody’s, the more optimistic of the three rating agencies that cast projections of the sector at the end of 2024.

Stability is a relative term in the current environment, meaning more of what we experienced last year:

• Falling trust in the value of higher education
• Uncertain enrollment rates
• Reduced international student mobility
• Institutional leadership change
• Climate crises
• Geo-political unrest
• More institutions closing or merging
• Higher student expectations

At an individual level, this “business as usual” scenario, means that institutions will amplify their efforts to become more efficient, elevate the student experience, adopt AI at scale, and double down on articulating their unique identity. At a sector-wide level, we will see more collaboration in areas that are mutually beneficial: shared services, marketing the importance and value of higher education, protecting against cyberattacks, and further consolidation of academic courses and programs.

The power of collaboration in this challenging environment will prove lifesaving if the sector is to retain some stability, particularly in the US, where leadership changes have become more common recently. In Australia, the sector posed a strong opposition to the government’s international student cap proposal, through demonstrating negative economic impact, impressive media coverage and gathering support from public personalities.

Keep calm and innovate

Regardless of what will or won’t happen on the political stage, what’s certain is that institutions can no longer rely on their old playbooks. Their current operating models, relying heavily on high-paying international students, with high operating costs and mass-produced courses, have already proved unsustainable.

If they haven’t already, many institutions will make significant changes not only in how they deliver education, but also in the supporting systems and processes that enable these big-scale institutions to operate more efficiently, improve their students’ experience, all with reduced budgets.

AI will play a key role in this step, but 2025 will still be a transition year, with institutions focusing on getting their house in order, cleaning their data, and setting up the processes that allow them smoother adoption further down the line.

It is still challenging for higher education to recruit the skillset needed to adopt AI at scale, in addition to the ethical challenges that are at the heart of the slower adoption – with good reason.

Digitization will continue at pace, as the only way to support increased demand for online services, courses and flexible access to resources, is to invest in a seamless digital infrastructure. Technologies such as AppsAnywhere have seen a boom in demand, as it solves that exact problem for the sector. Institutions that are quick to adopt such innovations will gain competitive advantage and see their reputation grow among students, who value a friction-less digital experience.

Institutions will need to review their revenue streams and think of new ways to provide education and expand their distance and hybrid learning offer to help with costs and barriers to entry. UK Visas and Immigration are reviewing the policy around remote learning for international students, which could lead to interesting “hybrid” models, where students could spend around a fifth (as the current draft states) of their time learning remotely. Whether this can help institutions attract more international students at the same premium costs remains to be seen.

Investment in upgrading outdated infrastructure, replacing static equipment with laptops or lower spec devices while outsourcing computer power to the cloud is a trend that will continue to grow in 2025. In fact, cloud adoption will see a significant increase, especially if it provides value-add such as analytics, efficiency gains or productivity, as institutions grapple with workforce shortages.

Regardless of what is happening in the background or the back office, higher education institutions are still a foundational pillar of society, whose role is to provide highest quality education, to advance research and societal progress. Putting students at the center and caring for staff and students will show more beneficial long-term than any temporary financial gains. This moment of potential crisis presents an opportunity to do things differently, to reinvent higher education as a more flexible offering, where the online and physical realms merge, where technology supports equitable learning and opportunities for all students. It’s an exciting time to be part of the sector and contribute to its transformation.