Community college enrollment declines will cause those schools' net tuition revenue to fall between 5% and 15% in the 2021 calendar year, according to a new report from Moody's Investors Service.
These schools' public access missions will make them unlikely to raise tuition, exacerbating their budget difficulties, wrote Moody's analysts. They gave the sector a negative outlook.
The predictions come on the heels of another Moody's report, which projected that higher education wouldn't likely see a "sharp" rebound from the pandemic.
Enrollment fell 9.5% year-over-year at community colleges this fall — representing the largest undergraduate declines in higher ed, according to the latest data from the National Student Clearinghouse Research Center. Losses of first-time students were especially steep at public two-year schools, dropping 18.9%.
Lower enrollment will weaken tuition revenue, Moody's analysts wrote. Moreover, community colleges, which tend to offer more hands-on training programs, may be less likely than four-year schools to move their offerings online.
State funding reductions could amplify these issues. California lowered allocations to its higher education general fund by almost $1.35 billion to make up for a budget shortfall, according to an October report from New America. And community colleges in Wyoming have taken a 10% reduction in state aid, with more cuts planned.
Reductions in state higher ed funding likely won't be as large as those made during the Great Recession, however. That's because many states are using reserves or issuing bonds to offset their revenue shortfalls, the analysts wrote.
A federal relief package supporting the sector could help to change the dismal outlook, the report states. Lawmakers have recently resumed talks over a new aid bill, though the plans don't say how much colleges would get.
Moody's predictions could also shift if the U.S. improves its management of the pandemic, which the report notes is driving much of the enrollment uncertainty. The country logged more than 200,000 cases on most days this month, and some hospitals have reached dangerous capacity levels.
The U.S. Food and Drug Administration is reviewing a promising coronavirus vaccine from Pfizer-BioNTech, which may be widely available by the spring. The vaccine's arrival could speed up economic recovery and improve public health, Moody's analysts wrote, leading to better community college enrollment next fall.
In the meantime, property tax revenues could offer stability to community colleges, they wrote. Because the schools rely more on part-time faculty than do four-year colleges, they could also more easily add or cut workers to match their budgetary needs.