April 13 - Fitch Ratings sees that the increase in cost of attendance at
U.S. colleges and universities, which began during the mid-1990s and accelerated
through the end of the past decade, has not yet had a meaningful impact on
enrollment at most institutions. The lack of a negative enrollment trend, we
believe, underscores fundamentally robust societal demand for post-secondary
education and the nondiscretionary nature of a college degree. Both dynamics, in
our view, need to be considered by investors in higher education bonds when
analyzing the sustainability of tuition levels and annual rates of increase in
According to public data collected by The College Board, average gross tuition
has risen significantly since 1996. Gross tuition at public two-year and
four-year institutions rose by 71%, and 361%, respectively; annualized, The
College Board estimates the rate of increase at public four-year colleges and
universities at 5.1% over the rate of inflation. For private, nonprofit
four-year institutions, tuition rose by 152%.
Despite these seemingly staggering increases in cost, The College Board data
indicate that enrollment nationally in public and private institutions has
increased sharply since 1996. The increase at public two-year institutions was
136%. Public four-year colleges and universities grew by 133%. And private
four-year enrollment rose by 142%.
The historically very low level of tuition charged by most public colleges and
universities exacerbates the reported percentage change in tuition over time;
clear pricing advantages continue to be enjoyed by most public institutions. For
private institutions, a noticeable uptick in financial aid, particularly during
the financial crisis of 2009, helped minimize the actual burden created by
Stable to upward trending enrollment through the intermediate term is likely to
continue for most public and private institutions. We believe this trend will be
fostered by colleges and universities enhancing marketing and recruiting efforts
and increasing resources to financial aid. As reported by the Department of
Labor Statistics, 68% of 2010 high school graduates were college bound,
approximating the record of 70% set the prior year.
Additional information is available on www.fitchratings.com.
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expressed are those of Fitch Ratings.