New York State’s new free college tuition program for some families will have a minimal credit impact on the state’s public universities, according to Moody’s Investors Service.

Moody’s analyst Susan Fitzgerald wrote in a report Wednesday that the Excelsior Scholarship program could have a credit negative effect on the State University of New York and the City University of New York CUNY if there are large enrollment increases. Fitzgerald explained that the free tuition, which will apply initially to families making less than $100,000 of income, will only cover some of the cost for educating students and in case of enrollment spikes both systems would need to cover the additional costs from within their budgets or develop new revenue streams. Moody’s rates SUNY and CUNY debt at Aa2 with stable outlooks.

The University at Albany is among the State University of New York schools that will now offer free tuition for eligible families under the state's new Excelsior Scholarship Program.
The University at Albany is among the State University of New York schools that will now offer free tuition for eligible families under the state's new Excelsior Scholarship Program. Bloomberg News

“The new scholarship may contribute to a modest increase in overall enrollment, but we believe it is more likely these funds will supplant tuition dollars already paid by students from middle-income families,” said Fitzgerald. “Therefore it is unlikely to result in substantial new enrollment or funding for New York’s public universities.”

Fitzgerald added that larger enrollment also has the potential to shift students away from private colleges in New York to state schools. She said while these enrollment shifts could pressure some of New York’s smaller more regional private colleges, private universities with larger endowments or national brands are less likely to get negatively impacted since they are less reliant on in-state students and have greater budgetary flexibility.

New York’s higher education budget for the 2018 fiscal year is similar to past spending plans with limits on the growth of residential undergraduate tuition rates, which Fitzgerald notes will constrain overall revenue growth at SUNY and CUNY. She said the $200 tuition increase for resident undergraduates equates to a roughly 3% tuition increase for both systems from fall 2016 tuition charges.

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