November 19, 2015 / 5:05 AM / in 2 years

Slow U.S. tuition growth is 'new normal' for higher ed - Moody's

2 Min Read

Nov 18 (Reuters) - U.S. universities and colleges should expect to see sluggish tuition growth next year, according to a report released Thursday by Moody's Investors Service.

Higher education institutions suffered the weakest tuition growth in the history of Moody's survey last year. Such sluggishness "appears to be the 'new normal,'" reported Moody's, which is predicting another year of tuition revenue growth near levels of inflation, approximately 2 percent.

That is a significant departure from the booming years of 2005 to 2013, when schools saw net tuition grow by more than 5 percent annually.

Almost two-thirds of public universities will see tuition growth under 3 percent, in part because of state-imposed limits to keep tuition low and student enrollments that are either flat or declining.

Among private universities, 44 percent are now discounting tuition, meaning they are slashing their price tags by more than half. Private colleges with only a regional draw, as opposed to national recognition, will enjoy the least pricing power.

There is an increasing divide between schools with national brands and a strong student pipelines and those without. Law schools and other universities that cater to niche markets are most exposed to volatile swings in revenue, Moody's noted.

Regional distinctions persist as well. Around the country, schools in the south and the west are projected to have stronger net tuition revenue growth. The Northeast and Midwest will experience more pressure. Overall, 40 percent of universities saw lower enrollments this fall than five years ago.

To ease the fiscal stress, many schools have turned to recruiting international students that can pay full tuition.

"This growth helps buffer demographic challenges, particularly in the Midwest and Northeast," Moody's reported. But "it is not a panacea given the relatively small portion of total enrollment and increasing competition for these students."

Reporting by Robin Respaut; Editing by Cynthia Osterman

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