Downturn Still Squeezes Colleges and Universities

An annual survey of colleges and universities found that a growing number of schools face declining enrollment and less revenue from tuition.

The survey, released by the credit ratings agency Moody’s Investors Service on Thursday, found that nearly half of colleges and universities that responded expected enrollment declines for full-time students, and a third of the schools expected tuition revenue to decline or to grow at less than the rate of inflation.

“The cumulative effects of years of depressed family income and net worth, as well as uncertain job prospects for many recent graduates, are combining to soften student market demand at current tuition prices,” Emily Schwarz, a Moody’s analyst and lead author of the report, said in a statement.

The growing financial challenges for colleges and universities come as students and graduates have amassed more than $1 trillion in student debt, and many are struggling to pay their bills. Nearly one in six people with an outstanding federal student loan balance is in default, the federal government says.

Before the financial crisis of 2008, colleges and universities routinely raised tuition with little effect on the number of prospective students who applied. Some private colleges said that applications actually rose when they increased prices, apparently because families equated higher prices with quality.

But that attitude has changed, in part because family incomes have declined. Ms. Schwarz also noted, “Tougher governmental scrutiny of higher education costs and disclosure practices is adding regulatory and political pressure to tuition and revenue from rising at past rates.”

In addition, she noted that budget negotiations in Congress could lead to cuts in student aid programs while the share of students that depend on government help continued to rise. At public universities, federal loans finance a median of 40 percent of student charges; at private schools, the median is 21 percent. <Read more.>

Via Andrew Martin, The New York Times.

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