Dive Brief:
- Moody’s Investors Service predicts meager tuition revenue growth for colleges and universities, with about 40% seeing student-generated revenues grow by less than 2% in 2015.
- While state funding for public universities will increase by 3% to 4%, it won’t keep up with the growth of expenses, according to Moody’s. Appropriations are increasingly targeting workforce training programs, and in some states, increased funding comes with the condition that tuition cannot be raised.
- Overall, the firm's outlook for the U.S. higher education industry sector is negative for the next 12 to 18 months, meaning that negative actions on credit ratings are more likely, on average.
Dive Insight:
Not all of Moody’s outlook for higher education is negative, though most of it is. The report points to several “green shoots” — or investor-speak for “data points of hope that college administrators can cling to.” Among them: Long-term demand for college degrees is strong, with the U.S. Department of Education predicting 20% and 9% growth for master’s and associates degrees, respectively, through 2022. And improved household balance sheets combined with a modest rebound in the housing market leads to a willingness to spend on education, with household debt peaking at 130% of disposable personal income in 2007 and dropping to 104% as of March.
