Higher education in 2026: 5 trends reshaping the landscape

Higher education entered 2026 at a crossroads. Institutions are grappling with new financial realities, workforce challenges and technological disruption. And this is all against a backdrop of declining enrollment and geopolitical uncertainty.

Recent policy changes, including a tiered endowment tax structure, are reshaping financial planning. Meanwhile, hiring freezes and shrinking merit pools are altering compensation strategies, and unionization momentum is growing among non-tenure-track faculty.

Technology, particularly AI, is transforming learning delivery and administrative processes, while institutional enrollment declines threaten billions in revenue. For leadership teams, these trends demand proactive planning, transparent communication and innovative approaches to talent and financial management.

1. 01

   Escalating policy changes and financial pressures

   The most significant policy development is the U.S. budget reconciliation bill’s endowment tax hike, which introduces tiered rates based on endowment size per student:

   • 1.4% for $500,000 to $750,000 per student
   • 4% for $750,001 to $2 million per student
   • 8% for more than $2 million per student

   This change, effective for fiscal years beginning after Dec. 31, 2025, dramatically increases compliance complexity and financial strain for private institutions. Universities now must calculate student-adjusted endowment costs, revisit spending rules and prepared for heightened scrutiny from the U.S. Internal Revenue Service.

2. 02

   Enrollment declines and demographic shifts

   With the number of high school graduates projected to start a long decline after 2025 and as growing skepticism about the value of a degree rises, colleges are facing intensifying competition for students. Negative financial outlooks and narrowing margins compound the challenge.

3. 03

   Technology and AI transform learning

   AI adoption is accelerating across higher education. According to recent surveys:

   • 93% of institutions plan to expand AI use within two years
   • 85% predict increased use of AI for enrollment modeling
   • 59% express concern about data security
   • 78% worry about academic integrity

   AI is revolutionizing administrative efficiency and predictive analytics, but it also raises governance and ethical questions.

4. 04

   Workforce and compensation challenges

   Hiring freezes are widespread — 63% of Ivy and private R1 institutions as well as multiple public systems have confirmed freezes through fiscal year 2026. Merit pools are shrinking (median is about 3%) and salary caps are common. Meanwhile, 70% of faculty appointments are now non-tenure track, driving unionization momentum and raising equity concerns.

5. 05

   International enrollment declines

   Visa suspensions and geopolitical tensions have led to sharp drops in international student enrollment, threatening billions in revenue and thousands of jobs. In 2023, international students contributed $44 billion to the U.S. economy; recent declines could result in $7 billion in lost revenue and significant job losses across sectors.

Actionable recommendations for leadership

1. 01

   Financial strategy

   • Model endowment tax impacts and adjust appending rules
   • Brief trustees and donors on new compliance requirements
   • Explore alternative revenue streams (e.g., continuing education, partnerships)

2. 02

   Workforce and compensation

   • Audit pay structures for equity and transparency
   • Develop retention strategies for critical roles, including contingent faculty
   • Prepare for union negotiations with a clear compensation philosophy
   • Modernize compensation tools and lean on AI to streamline processes

3. 03

   Enrollment and student experience

   • Invest in predictive analytics for enrollment management
   • Expand hybrid and credential-based programs to attract non-traditional learners
   • Strengthen domestic recruitment to offset international declines

4. 04

   Technology and governance

   • Create an AI adoption roadmap with strong data privacy protocols
   • Engage faculty in technology decisions to maintain trust and academic integrity
   • Monitor global competition and adapt curriculum for future skills

5. 05

   Leadership and governance

   • Plan for leadership continuity by implementing structured succession planning and retention strategies for critical roles, including identifying high-potential learners early, creating development pathways and offering targeted incentives (e.g., retention bonuses, deferred compensation, other compelling executive benefits and perquisites)
   • When consolidating executive roles, approach the process strategically to minimize disruption; that is, clarify responsibilities, communicate the rationale for changes and provide transition support for affected leaders
   • Communicate transparently with stakeholders: Share timelines, decision-making criteria and expected benefits to reinforce confidence and maintain organizational stability during periods of change

Looking ahead

The institutions that thrive in 2026 will be those that embrace adaptability, prioritize financial resilience and invest in workforce strategies that align with evolving academic and athletic landscapes. Proactive planning today will define success tomorrow.

Authors

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Josephine Gartrell, J.D.

Managing Director, Work & Rewards

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Russell Wilson

Senior Director, Executive Compensation and Board Advisory

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Brian Xing

Analyst, Work & Rewards.

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