Mergers of small colleges can be a credit positive for some colleges, Moody's Investors Service said.
The Moody's report came after Sweet Briar (Va.) College said it would shut down at the end of this academic year. Sweet Briar's problems were an example of the challenges being experienced by small, rural colleges, Moody's vice president Eva Bogaty said in the report Monday. Of the 80 small colleges and universities Moody's currently rates, two thirds have ratings of Baa1 or lower.
Over the past two years more than half of the colleges had tuition discount rates of 40% or higher. This is a much higher proportion of the schools than was the case as recently as 2009.
Recently six schools have announced mergers with six other schools, Bogaty said. "Merged entities can benefit from increased enrollment, size and programmatic diversity," Bogaty said, adding that she expects the pace of mergers to increase. "They simultaneously face risks as they address the structural financial challenges that contributed to the merger."
The mergers cited by Moody's include: Thunderbird School of Global Management with Arizona State University; Union Graduate College with Clarkson University; William Mitchell College of Law with Hamline University College of Law; Montserrat College of Art with Salem State University; AIB College of Business with State University of Iowa; and Piedmont International University with Tennessee Temple University.
