Two Midwest schools selling bonds this month illustrate the range of funding challenges facing higher education under the Trump administration.
Knox College is a small private school, with a low investment grade rating, focused on undergraduate teaching. Michigan State University is a Big Ten behemoth with massive research undertakings and high bond ratings.
Both face problems created by the White House's antipathy toward foreigners and higher education.
Knox, in Galesburg, Illinois, was ramping up its international student population when Trump took office. About
The share of international students increased from
In the preliminary official statement for its recent bond deal, the college says a focus on international students was a key prong in successful efforts to increase enrollment, along with athletics and fine arts.
As of April 24, the Trump administration had revoked the visas of more than 1,800 international students at over 280 colleges across the U.S.,
Knox CFO Alec Guroff declined to say whether any Knox student visas have been affected.
The POS notes that Knox is "working with its international admitted students to initiate the visa application process early."
On Tuesday, Politico reported that the
Guroff said Knox's "bond and finance advisors" advised him not to answer questions about the college's international student enrollment trends or its share of Illinois applications.
S&P Global Ratings downgraded the college to BBB from BBB-minus ahead of its deal this month, citing the increased debt and persistent deficits.
"To date, management has not reported any material changes with their existing international students," said S&P analyst Vicky Stavropoulos.
Stavropoulos said S&P considers the security on the bonds equivalent to a general obligation pledge.
Knox's $25.7 million revenue bond deal, issued through the city of Galesburg, priced last week and closes June 4.
Underwriter Stifel priced the tax-exempt piece to yield between 5.54% for a 2040 maturity to 5.96% for 2045.
The debt will fund capital improvements, as well as working capital for the college, which is trying to reduce draws on its endowment.
According to the
Michigan State University — a Big Ten land grant school with an extensive research focus — is a different animal than Knox, a tuition-driven private college focused on teaching undergraduates. But it faces its own challenges from the Trump administration.
MSU — which plans to go to market Wednesday or Thursday with $386.8 million of general revenue bonds, subject to market conditions — also confronts heightened uncertainty around student visas. MSU had at least 12 visas revoked since Trump took office, according to Inside Higher Ed.
The Trump administration is also looking to slash federal research funding and to tie ideological strings to federal grants.
The National Institutes of Health said in February that it would cap at 15% the indirect funding rate grant recipient universities receive to fund infrastructure and operations that support grants. The cap would apply not only to new grants, but to already awarded grants, as well.
MSU currently has about $200 million of research funding from the NIH, S&P Director Ken Rodgers said, and if a 15% cap were put on its facilities and administrative indirect cost recovery rate of 57%, it would cut MSU's revenue by $18 million.
MSU gets 22% of its federal funding from the NIH and is the top-ranked school nationally in Department of Energy expenditures, according to an online investor presentation for its bond deal this week.
The National Science Foundation supplies 13% of MSU's federal funding. The Department of Energy accounts for 36%.
MSU received about $126.5 million in indirect cost recoveries related to federal research in fiscal year 2024, according to the
The indirect funding cap was challenged in court, and in March, a district court judge granted a nationwide preliminary injunction.
A White House executive order on diversity, equity and inclusion also ordered an end to all grants seen by the administration as relevant to DEI. That meant forcing NIH and NSF staffers to search all grants for words like "women," "ethnicity" and "gender," and to identify grants tied to climate change, according to the law firm
The
S&P's Rodgers said MSU has indicated "that they are actively doing scenario planning and do not intend at the present time to cut back on research, as it's core to their reason for being." S&P rates MSU's Series 2025A bonds AA. The outlook is stable.
He added that at most R-1 colleges and universities, "the contingency plans often will indicate how research might be impacted under different scenarios of funding while not making this information public simply because of the desire not to cause unnecessary panic."
Moody's assigns its Aa2 rating and stable outlook to the Series 2025A bonds.
Patrick Ronk, associate vice president and analyst at Moody's, and Emily Raimes, associate managing director at Moody's, said that threats to federal research funding do present a risk to MSU. The extent to which the 15% indirect funding cap will affect the university's operating performance is not clear, they said.
But they believe research expenses can be cut as grant funding is cut. They predicted the university will be able to manage the change.
MSU spokesperson Amber McCann referred all questions about shifts in federal policy, plans for research expenditures, and current or expected future funding cuts to the preliminary official statement.
MSU had received official communications affecting more than 125 awards by April 18, the university said in the POS. Some projects have been reinstated following temporary restraining orders. But the university's budget development guidelines for the next two fiscal years call for reductions in operating expenditures ahead of federal policy changes, "which cannot currently be quantified," the POS says.
Still, MSU appears to be banking on a future for federally funded biomedical research. Bond proceeds will fund the construction of a new biomedical research building, including lab facilities, central support facilities and offices, in the city of Detroit, according to the POS. The board will treat the share of the bonds used to build the biomedical research facility as qualified 501(c)(3) bonds.
Bond proceeds will also build a new multicultural center; a new student recreation and wellness center; and a new Plant and Environmental Sciences building. And they will fund infrastructure improvements to the MSU Museum and renovations to the Campbell Hall student residential building.
Part of the deal will be used to refund bonds issued in 2015.
The senior managing underwriter on the MSU deal is Jefferies and co-senior managing underwriter is BofA Securities. The municipal advisor is Blue Rose Capital Advisors, and bond counsel is Miller, Canfield, Paddock and Stone.
Ronk and Raimes at Moody's noted MSU's lower leverage compared to the Aa public median, which they said is due to the university's lack of pension exposure. But MSU's debt to EBIDA is elevated because of the university's thinner operating performance compared to peers, they said.
S&P's Rodgers said the rating agency continues to monitor exposure for all R-1 research universities.
"There is heightened sector risk for these institutions, although many, like MSU, are highly rated and have obtained those high ratings by demonstrating that they are well managed and usually have ample financial resources," he said.
The university has $2.24 billion of general revenue bonds outstanding and $131.38 million of commercial paper.
