Lower enrollment at US public universities hits revenues -Moody's

WASHINGTON Thu Jan 10, 2013 11:46am EST

WASHINGTON Jan 10 (Reuters) - Tuition will likely decline this fiscal year in a record 15 percent of U.S. public universities, while schools expecting growth anticipate the lowest increases in over a decade, Moody's Investors Services said on Thursday.

"While a majority of universities continue to project net tuition revenue growth, a growing share is not able to keep pace with inflation," said Moody's in a report that also looked at private education. "This growing revenue challenge is forcing college leaders to pursue more aggressive cost cutting measures and introduce innovative revenue strategies."

Enrollment declines and funding cuts to federal financial aid, which primarily supports those attending state universities, are keeping tuition from rising, Moody's said.

"Lack of growth in family income and depressed household net worth continue to drive price sensitivity and demand for student financial aid, resulting in weaker pricing power for colleges," Moody's found.

Students are weighing the benefits of higher education in light of the low job prospects for recent graduates, and some come from families that cannot afford tuition payments after the 2007-09 recession. Meanwhile, the federal government is stepping up scrutiny of colleges, at the same time as budget battles are putting student aid funding in limbo.

Students are giving up on attending college altogether, not pursuing graduate degrees, or turning more to community colleges, Moody's said. There has also been a "flight to quality," with students turning their backs on smaller or lesser-known schools.

The Moody's survey found that nearly half of all schools are reporting lower enrollment.

As the recession hit states' revenues, many were forced to slash spending in order to keep their budgets balanced. One place they turned was higher education, and the reduced support forced many public universities to raise tuition. Most states' fiscal years end in June, mimicking the school year.

Still, state schools have remained a good deal for students, with the median net tuition for a student currently projected at $8,107, Moody's said. The median for those at private universities is $20,996.

Moody's found that the largest enrollment declines for this school year were in graduate programs, smaller and lower-rated universities, and in public schools in the Northeast and Midwest.

"About half of public universities project undergraduate enrollment declines from fall 2011 to fall 2012, up significantly from a third of institutions that experienced declines from fall 2006 to fall 2007," Moody's said.