WASHINGTON, Sept 9 Add one more strain to the
finances of U.S. universities: a decline in enrollment.
Last week the U.S. Census reported college enrollment
declined for the first time in six years in the fall of 2012.
That, in turn, threatens higher education revenue, said Moody's
Investors Service in a special report on Monday.
Already, "precipitous enrollment declines for fall 2013"
have hurt the credit quality of two private colleges - Loyola
University in Louisiana and Central College in Iowa - and a
public one, St. Mary's College in Maryland.
"Enrollment declines in higher education are credit negative
because they heighten competitive pressure for all universities.
This limits opportunity to grow tuition revenue, now the primary
revenue for the majority of public and private universities,"
Enrollment challenges will persist for several years, and
those institutions likely to suffer the biggest squeeze have
lower credit ratings, are especially dependent on tuition for
revenue, or lack a strong brand name or market position, Moody's
Public universities and colleges have fought a losing
financial battle since the start of the 2007-09 recession.
States have slashed higher education spending, costs have risen,
and students are becoming more reluctant to borrow.
According to the liberal-leaning Center on Budget and Policy
Priorities, state governments now spend 28 percent less per
student than they did in 2008. Meanwhile parents and political
leaders are pushing to make both private and public colleges
more affordable in the face of ever-rising tuition.
Graduate enrollment has declined for the past two years as
high unemployment creates doubts about the value of paying for
another degree, but the fall of 2012 also saw a dip in the
number of undergraduates.
Moody's said graduate programs typically generate more
revenue per student than undergraduate ones. It added that the
lower demand for graduate education will likely continue for
some time, given that applications for law, education and
business schools have all declined dramatically.