University Success Improves Student Housing Potential

Graduating high school and college seniors may be breathing a sigh of relief after long years of effort, but universities are still at work crunching their numbers.

The end of another school year marks the time for universities to assess some important metrics, including six-year graduation rates, freshman retention rates and acceptance rates. These statistics also have an impact on the student housing industry: They all drive enrollment, which in turn drives student housing demand.

All three rates are considered qualitative measures of how well universities are performing their function as institutions of higher education. Students may check these statistics when deciding which school to attend, or if they would be investing their money wisely by pursuing a degree at a certain university.

For students, considering their education as an investment is more important than ever. Many will have to take out loans over the course of their college career – loans that will be difficult to pay back if their degree doesn’t pay off with a better job or higher earnings.

A study by the Harvard Joint Center for Housing Studies showed that the largest debt burdens and greatest repayment difficulties often come for students who didn’t graduate. The report stated that from 2001-2013, the share of people with student loan debt of at least $50,000 who didn’t have a degree rose from 6% to 22%.

Because of this (among other factors), it is important for students to assess their ability to actually complete college. It is also important for universities to maintain a healthy six-year graduation rate.

We examined the Axio175 to see which universities had the highest and lowest six-year graduation rates, as well as the highest and lowest freshman retention rates and acceptance rates. The Axio175 are 175 of the top universities around the country, as favored by publicly traded student housing REITs and larger owners and managers of student housing properties.

Most of the 10 universities among the Axio175 with the highest six-year graduation rates in 2016 are larger Tier 1 public universities. Only two, the University of Notre Dame and Lehigh University, are private institutions.

California was the best-represented state among the top 10, with three branches of the University of California System — UC Berkeley, UC Irvine and UCLA — on the list. Two entries were Midwestern colleges, and the rest are universities located on the East Coast.

Enrollment for the 2016-2017 school year at the private universities was slightly lower than the public institutions, but the average enrollment for all 10 was about 32,700. Enrollment growth for these universities has generally been trending upward at healthy rates over the past 10 years.

The 10 universities of the Axio175 with the lowest six-year graduation rates were more likely to have had longer runs of negative enrollment growth during the past 10 years. However, in 2008 Savannah State University and Utah Valley University had growth rates of 11.8% and 12.0%, respectively, almost double the rate of any single year at the top 10 universities.

Average enrollment for the 2016-2017 school year was lower at the universities with lower graduation rates, at around 11,800. Most of these universities are also four-year public schools, but many of them are primarily commuter schools and branch campuses. In terms of location, these universities were mostly in the South and West, with Georgia represented most on the list.

The lists of universities with the highest and lowest freshman retention rates in 2016 included many of the same schools as the lists for six-year graduation rates. Freshman retention rates measure how many freshmen return to a university for their sophomore year, instead of transferring or dropping out.

Higher freshman retention rates reflect that more students are satisfied with their experience at a university. Of course, freshmen might drop out for many reasons outside of a university’s control, such as financial and academic difficulties or family and personal problems.

A higher percentage of freshman returning for their sophomore year can be particularly beneficial for owners of privately-owned student housing: Many universities require freshmen to live on campus, and off-campus student housing generally houses sophomores, juniors and seniors.

Both freshman retention rates and six-year graduation rates can be related to the university’s selectivity or its acceptance rate. Lower acceptance rates are often seen as a way for universities to show that they are more exclusive.

In some respects, the truth of this view is demonstrated by the fact that many of the 10 Axio175 universities with the lowest acceptance rates are also on the lists for highest freshman retention and six-year graduation rates. Though accepting fewer students may limit enrollment growth in the short term, in the long term the university can maintain enrollment levels and ensure student retention and completion. The universities below were some of the most selective amongst the Axio175 universities in 2016.

However, the list for the 10 universities with the highest acceptance rates has few entries in common with the lists for lowest freshman retention and six-year graduation rates. Utah Valley University is the only school included on all three, and it has one of the highest enrollments across the universities that fall into the lowest lists.

What these universities do have in common with those that have lower-than-average freshman retention and six-year graduation rates is that they are typically smaller public universities. These schools may rely more on enrollment growth for success than larger, Tier 1 institutions. The trade-off might be that they lose more students after their first year, or graduate fewer students after six years.

Taken together, these three metrics can give some idea of the quality of the university and the student body, though whether students continue studying or ultimately graduate may not be solely a test of academic rigor. Student housing owners can also use these metrics to measure how likely schools are to keep up the steady enrollment needed to support demand.