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?

We’re looking at two potential scenarios for this year:

1. More of the same, but much more accelerated - the more desirable projection is that we’ll see the same drivers at work, deepening their impact from last year, and shifting in priority ranking.
2. Expect the unexpected – the more catastrophic predictions, especially for the US, come with the Trump presidency, and his team’s commitment and ability to implement the changes he promised in his campaign.

Scenario 1: The new normal – or perhaps the calm before the storm?

As the first quarter of this century comes to an end, all eyes are on Trump’s Inauguration Day that will set the tone for things to come. Outside of the US, the sector is under similar pressures to reform: the UK is under government mandate to improve 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. 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.

There is some hope of stability for the sector, at least according to 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, with recent attacks on leadership attacks on high profile institutions. 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.

Scenario 2: US, throw out the rule book

It is hard to fathom that in today’s Western democracy, one person can have such an influence on the global state of affairs. As Donald Trump takes charge, we can only expect the unexpected.

Will the Trump-Musk duo carry out a crusade against elite universities? Will equity funding and programs designed to support participation from lower-income students suffer from the potential dismantling of the Department of Education? Will state governments take more control of higher education, and if so, with what implications? Will international students face mass deportations? Will LGBTQI+ rights be under threat in the US, and how can institutions carry on their duty of care for all students?

“I think it’s an extremely worrisome time for universities, extremely so,” said L. Rafael Reif, the president emeritus of MIT.

The political and cultural shift from reverence to being “the enemy” (Vice-President JD Vance), the increasing scepticism in science, expertise and academia, proliferated by some high-profile Trump supporters, and the threats to research funding, diversity efforts and equity funding are destabilizing for the sector.

In the face of these adversities, what should institutions do?

Keep calm and innovate

Despite the worst-case scenario questions rising in the air, some commentators think Trump may be good for colleges, as he promises to reduce regulation and reporting, which in turn could be good for business.

Whatever scenario we may end up in, what’s certain among this wave of uncertainty 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.

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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.

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