For 2012, Moody’s Investors Service retains the mixed sector outlook for not-for-profit private and public colleges and universities that was established last year.
The rating agency expects slower revenue growth, greater student resistance to tuition increases, and heightened public scrutiny, requiring universities to operate more efficiently and keep costs down.
Moody’s has a stable outlook on the diversified market-leading colleges and universities, those with strong market positions and balance sheets as well as multiple revenue-generating business lines. A negative outlook is in place for the bulk of rated colleges and universities, which are far more dependent on state appropriations, student tuition, or both.
“The market leaders are typically rated in the Aaa and Aa categories, though not exclusively, and represent a minority (about one-third) of our rated higher education portfolio,” said Kim Tuby, author of the report. “The majority segment with a negative outlook attracts students more regionally, retains less pricing power and maintains thinner balance sheets.”
During the past year, Tuby said, public and political scrutiny of colleges and universities, both nonprofit and for-profit, have escalated and that “the sector will remain under the microscope in 2012 and beyond.”