Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping the Two-Year College Boom
Transcript
- Lucas: You know, I've been digging into the latest enrollment numbers, and there's a trend that keeps popping up that I think we've been underestimating. Luna: Which one? Lucas: Community colleges. Nationally, enrollment at two-year public institutions is up about 12 percent from last year. And this isn't just the traditional 18-year-old crowd — the biggest growth is among students over 25. Luna: That's a pretty big jump. Is this a continuation of the post covid rebound, or is something else driving it? Lucas: Well, the COVID rebound was real — enrollments cratered in 2020 and then recovered somewhat. But this latest surge started in late 2024 and has accelerated into 2025 and 2026. I think the stagflation dynamic is key here. Luna: Explain that link. How does slow growth and high inflation push people back to school? Lucas: Sure. Look at the labor market right now. The unemployment rate is 4.3 percent, which is low by historical standards, but job openings have been volatile. The JOLTS data from April showed about 7.6 million openings, up from a recent low, but wage growth is barely keeping up with inflation. Average hourly earnings are up maybe 4 percent year-over-year, but core CPI is running above 3 percent. So real wages are essentially flat. Luna: Right, so workers feel like they're treading water. And if you're stuck in a low-wage job with no advancement, going back to school might feel like the only way to get ahead. Lucas: Exactly. Community colleges are particularly attractive because they're cheaper, they offer flexible schedules, and they have strong ties to local employers. We're seeing big enrollment jumps in programs like nursing, IT support, and skilled trades — welding, electrician training, that sort of thing. Luna: So this is really a retraining boom. People are betting that a two-year credential will give them a better shot in a tight economy. Lucas: Right. And there's some data to back that up. According to a recent analysis from the Georgetown Center on Education and the Workforce, associate's degree holders earn about 25 percent more than high school graduates over a career. In a stagflation environment, that premium becomes even more valuable. Luna: But there's a catch, right? Because inflation doesn't just hit households — it hits colleges too. Tuition and fees have been rising, and so have costs for things like textbooks and transportation. Lucas: Yeah, that's the tension. Community colleges are still the most affordable option, but they're not immune. The College Board reported that average tuition and fees at public two-year colleges rose about 4 percent this year, which is roughly in line with inflation. But here's the thing — federal Pell Grants, which many community college students rely on, haven't kept pace. The maximum Pell Grant is still around $7,395, which covered about 60 percent of the cost of attendance a decade ago. Now it covers closer to 50 percent. Luna: So students are having to make up the difference with loans or work more hours, which cuts into study time. That's the classic squeeze. Lucas: Exactly. And yet, we're still seeing this enrollment surge. So the question is: is this a durable shift, or a cyclical response that will fade once the economy improves? Luna: What do you think? Lucas: I think it's partly both, but there's reason to believe some of it sticks. The industries that are hiring — healthcare, technology, green energy — they increasingly require post-secondary credentials, even for entry-level roles. And two-year programs are often the fastest way to get those credentials. Luna: Right. And we've also seen community colleges become more innovative in how they deliver education. More online courses, more evening and weekend programs, more partnerships with employers to create direct pipelines to jobs. Lucas: Yeah, I spoke with a dean from a community college in Ohio who said they've started offering 'micro-credentials' — short, focused certificates that take six months to a year, often in fields like medical billing or cybersecurity. Those are very popular with adult students who can't commit to a full two-year program. Luna: That makes sense. You get a credential quickly, you can start earning more, and then maybe you come back later for more. Lucas: Right. And there's also a geographic dimension. In rural areas, community colleges are often the only post-secondary option within commuting distance. And those areas have been hit hard by the broader slowdown in manufacturing and agriculture. Luna: So the enrollment boom is really a lifeline for some local economies. More educated workers attract employers, and that can create a virtuous cycle. Lucas: Exactly. But there's a risk, too. If the economy tips into a recession — and with GDP growing at only 1.6 percent annualized, that's a real possibility — state funding for community colleges often gets cut. That could force tuition higher or reduce program availability just when demand is spiking. Luna: So the very thing that makes community colleges a good solution in stagflation — their affordability and flexibility — could be undermined by the stagflation itself. Lucas: That's the ironic loop. I've been looking at historical parallels, and during the 1970s stagflation, community college enrollment also rose, but the gains were later reversed when the economy recovered and federal policy shifted. Though the landscape is different now — demographics, the nature of work, the cost of four-year college — so history might not repeat. Luna: It's interesting — we talk a lot about how stagflation affects consumer behavior, housing, investing. But education is this quiet channel that might have really long-term effects on the workforce. Lucas: And that's why I think it's worth paying attention to. If the enrollment boom continues, we could see a more skilled labor force in a few years, which could boost productivity and growth. But if the squeeze becomes too painful and enrollment drops, we might lose an entire cohort of workers who needed retraining. Luna: Speaking of making things work — and I don't want to interrupt the thread — but this is exactly the kind of deep dive that makes this show worth doing. If walking through the economy with us has made something click for you, it'd be great if you'd consider buying us a coffee. It's the smallest gesture, but it honestly helps keep this thing ad-free and going. The link is buy me a coffee dot com slash fexingo. Lucas: Yeah, it really does. And it's not about a big ask — just if today's episode was worth a coffee to you. We really appreciate the listeners who've done that already. Luna: Absolutely. So back to the enrollment picture — one thing I've been wondering is whether this boom is concentrated in certain states or regions. Lucas: Good question. The data I've seen shows the biggest increases in the Midwest and Southeast. States like Michigan, Ohio, and Tennessee are seeing double-digit growth. Some of that is because those states have strong manufacturing histories and workers are looking to transition into new roles as traditional industries automate or shrink. Luna: So it's not just about inflation pushing people back to school — it's also about structural changes in the economy that are making certain jobs obsolete. Lucas: Exactly. Stagflation just accelerates that process. When the economy is growing slowly, companies are less likely to invest in training their own workers. So workers have to invest in themselves. And community colleges are the most accessible vehicle for that. Luna: There's also a policy angle. Several states have introduced free community college programs in the last few years. Tennessee's 'Reconnect' program, for example, offers tuition-free community college to adults without a degree. Lucas: Right, and those programs seem to be working. Tennessee saw a 15 percent increase in adult enrollment last year. So policy can amplify the trend. Luna: But free tuition doesn't cover living expenses. And for many adult students, the biggest barrier isn't tuition — it's the cost of childcare, transportation, and foregoing wages while they study. Lucas: That's a huge point. Even with free tuition, the total cost of attendance can be prohibitive. Some community colleges are experimenting with offering childcare services or flexible scheduling to address that. But it's still a challenge. Luna: So we have this boom, but it's fragile. If inflation stays high, the real cost of attendance rises, and the support systems might not keep up. Lucas: Right. And that's the lens I think we should keep watching. The enrollment numbers for this fall will be a key indicator. If they continue to climb, it's a sign that workers are adapting. If they plateau or drop, it suggests the barriers are too high. Luna: And that has implications for everything from the labor force participation rate to long-run productivity growth. Lucas: Exactly. So we'll be tracking it. For now, it's one of those quiet stories that doesn't make the front page, but it's reshaping the economic landscape one student at a time. Luna: Glad we dug into it. Lucas: Me too. That's all for this episode. We'll be back soon with another angle on what stagflation is really doing to the economy.