Recent declines in graduate school enrollment numbers are a credit negative for the higher education sector, Moody’s Investors Service said in a recent report.

Recently the Council of Graduate Schools released a report noting that in 2011 first-time graduate student enrollment declined for the second consecutive year. For the first time in five years total full-time equivalent enrollment in graduate programs declined in the fall of 2011.

“The decline is exacerbated by the persistent declines in MBA and law degree enrollments, both of which have long provided ample cash for universities,” Moody’s analyst Eva Bogaty wrote.

“Softening graduate enrollment is credit negative because it will likely depress net tuition revenue growth for the 65% of Moody’s rated colleges and universities with graduate programs that constitute more than 10% of their total enrollment,” she wrote.

Enrollments in the public and private university sectors increased annually from 1% to 3.5% from 2007  to 2010. This was “largely because of enrollment in burgeoning programs such as health sciences degrees,” Bogaty wrote.

Those earning graduate degrees still earn more than those who do not. According to the U.S. Current Population Survey, adults with bachelor’s degrees have a median salary of about $54,000. By comparison, the median salary for holders of master’s degrees is about $65,000, the median salary for holders of professional degrees is about $89,000 and the median salary for holders of doctoral degrees is about $80,000.

However, adults have become less inclined to pursue the degrees in the midst of a prolonged period of unemployment and growing concerns about student debt, according to Bogaty.

The decline in graduate enrollment is distributed unevenly. “Higher rated market leaders continue to enjoy stable or growing enrollment, while enrollment in lower rated universities is declining,” the analyst wrote.

In the fall of 2011 Aaa-rated public colleges and universities had a 0.8% rise in graduate enrollment and Aaa-rated private schools had a 1.5% rise in graduate enrollment. By comparison, public schools rated Baa and below experienced a 3.9% decline in graduate enrollment and private schools with those ratings had a 2.9% decline in graduate enrollment.

“Many public and private universities with both undergraduate and graduate programs have been relying on graduate student enrollment to help build net tuition revenue as various pressures encumber undergraduate net-tuition revenue growth,” Bogaty wrote. “For weaker institutions with low price flexibility, even small declines in graduate enrollment can impede growth in net tuition per student.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.