Eva Bogaty, an analyst for Moody’s Investors Services, has authored a study that cuts the outlook for the U.S. advanced schooling sector to negative, Bloomberg reports. The performance concerns come from the belief that the present higher education model is unsustainable along with a substantial overhaul will be required in order to put the industry back on sound financial footing.
Since 2009, Moody’s has maintained an adverse rating for U.S. universites and colleges, although it considered major research institutions to become stable. Now with tuition growing at an unprecedented rate and consumers expressing higher amounts of price sensitivity because of the 2008 economic collapse, the stable outlook on the largest schools is no longer justified.
The report also predicts that the trend of declining state funding for public universites and colleges is unlikely to reverse itself any time soon C if ever. This is another whammy to struggling schools, particularly if the cuts come on top of similar pullback in federal dollars.
The rating company downgraded more than 20 universities last year, according to data compiled by Bloomberg. Among the largest was Pennsylvania\’s State System better Education, a 14-school system including?Bloomsburg University.
Moody\’s cut $1.5 billion of the system\’s debt to Aa3 from Aa2 mainly due to its financial reliance on the state, which was also downgraded, it said inside a release in October.
Other institutions downgraded included the non-public schools Franklin W. Olin College of Engineering in Needham,?Massachusetts, and Morehouse College in Atlanta.
The financial struggles will be unevenly spread around the sector. While public colleges will probably hurt probably the most due to reduced government aid C which they depend for a substantial chunk of their operating expenses C private colleges will enjoy more space. The prestigious members of the Ivy League, using their substantial endowment funds, are unlike to suffer in the near future; those institutions are financially comfortable enough to sustain an autumn in the amount of cash brought in through tuition payments.
Yet the behemoths like Harvard aren’t entirely immune. The endowment funds from the country’s largest schools were hit through the fallout from the 2008 economic crisis and many have not yet recovered after the losses taken in 2008 and 2009.
While private institutions using the greatest endowments have flexibility to subsidize tuition, they\’re also facing more volatile returns, according to Moody\’s.?Harvard University?in Cambridge, Massachusetts, the earth\’s wealthiest school with a $30.7 billion endowment, lost 0.05 percent on its investments in the year ended June 30 after gaining 21 percent the year before.