When it comes to AI in education, we usually only hear about AI’s potential impact on the classroom: whether it can actually help students learn, or will encourage cheating. And while those are legitimate challenges, AI’s true potential is within saving higher education from its most existential challenges: dwindling enrollment driven by skyrocketing costs, falling retention from dissatisfied students, and decreased engagement from alumni.
Troubling downward trends have caused nearly 100 higher education institutions (i.e. private universities, community colleges, technical schools, etc.) to close between the 2022-23 and 2023-24 academic years, according to the National Center for Education Statistics. This trend is expected to continue, especially with federal grants for some initiatives in limbo and research grants slashed, per Inside Higher Ed.
The overall impact to programs involving federal student aid from the Department of Education, and research funding from agencies like the National Institutes of Health and the National Science Foundation, could be both significant and chaotic.
Even Before the Freeze, Many Higher Education Institutions Were In Budgetary Free-Fall
As tuition steadily rises every year, cost continues to be a major barrier to attending college. The Education Data Initiative reported the average tuition and fees for a public four-year school has risen 179%, and those costs have increased by 124% at private four-year schools. Adding to the burden, the average federal student loan debt balance is $37,853.
For many students, never-ending cost increases are sowing serious doubts about the return on investment for attaining a degree, leading colleges to close at a rate of one per week as student enrollment declines across the country. According to a Pew survey, only 22% of U.S. adults say the cost of college is worth it even if someone has to take out loans, 47% say it’s worth it but only without loans, and 29% do not find it worth the cost at all. A recent Gallup poll further validated that cost was the leading reason for declining enrollment.
The botched rollout of the Free Application for Federal Student Aid in 2024 exacerbated these problems as reported by The New York Times, making it impossible for thousands of students to determine if they could afford to attend. And higher ed can’t seem to catch a break — although the 2025 FAFSA rollout appears to be going more smoothly, the current administration’s intent to divert federal funding away from universities is expected to further put universities into a financial hole.
University expenditures vs. revenue in 2023
Administrative Costs Keep Rising
Major cost increases often aren’t due to investments in the education itself, such as hiring new professors and other educators, and instead are perpetuated by rising administrative costs.
According to a study in the Review of Social Economy, the number of full-time administrators grew by 164% between 1972 and 2018. Comparatively, the number of full-time faculty grew by 92% and student enrollment grew by 78%. Today, a majority of a school’s budget goes to administration. While administrators play a vital role, they are more often than not trapped in archaic and redundant systems and processes that balloon budgets, and consequently, pass on more costs to the student.
To reverse declining trends and navigate major headwinds facing the industry, institutions must urgently make college more affordable for students, and the most direct path is to confront inefficiencies within administrative offices.
Ratio of faculty to administrators over time
The Time To Innovate Is Now
AI presents a golden opportunity for schools to reimagine how they operate. There is obvious utility for the technology to help automate mundane and tedious tasks, such as note-taking, optimizing data entry, and summarizing or fact-checking documents, that take up considerable time and resources.
However, there’s even more potential for AI — specifically AI agents — to provide relief across a school’s most fundamental administrative processes, including student recruitment, success, and advising, as well as in alumni engagement. These operations are essential to a school’s identity and existence yet are the most labor-intensive and inefficient.
Current AI tools support workflow augmentation to streamline administrative tasks and help with automation, but still rely on administrators for operation and management. AI agents, however, can help schools autonomously review applications and personal statements, conduct preliminary interviews with applicants, answer student questions along the enrollment journey, and so much more — not only to streamline the work but also improve its efficacy. In fact, when polled, 86% of university leaders agreed that AI presents a “massive opportunity to transform higher education,” per a recent study that CollegeVine conducted.
Schools are already experimenting with what this can look like in practice. According to a survey from Intelligent, half of educational admissions departments were using AI in 2023, and 82% will by the end of 2024. For example, Georgia Tech uses AI to manage large volumes of applications by creating formulaic insights, such as calculating GPAs. Similarly, the School of the Art Institute of Chicago is using AI to predict enrollment trends and who’d be most likely to accept an offer, while Knox College is using AI to effectively manage student recruitment and maximize limited resources.
Budgets are increasingly being allocated for non-instructional spending, which is only passing the cost burden to students who are already struggling to afford tuition. AI agents, however, are a promising solution to alleviate these increasing costs.
AI As A Lifeline
While we’re only just now seeing the early benefits of these technologies, over time we can expect that its cascading efficiencies will have a direct impact upon unnecessary costs, saving industries marred by limited resources and financial dilemmas.
AI is no longer just about automating tasks. Now more than ever, higher ed needs to fundamentally rethink how they leverage AI agents to improve administrative processes, lower costs, and redirect resources back to their core missions.
