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 reporting agency Moody’s Investors Service on Thursday, found that nearly half of colleges and universities that responded expect enrollment declines for full-time students, and a third of the schools expect tuition revenue to decline or to grow at less than the rate of inflation.
Moody’s analysts say the problems are particularly acute at smaller, tuition-dependent schools and lower-rated universities, which have less ability to raise prices or attract students.
“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,” said Emily Schwarz, a Moody’s analyst and lead author of the report, in prepared remarks.
The growing financial challenges for colleges and universities come a time when students and graduates have amassed more than $1 trillion in student debt, and many of them are struggling to pay their bills. Nearly one in six people with an outstanding student loan balance is in default, the federal government says.
Before the financial crisis of 2008, colleges and universities routinely raised tuition and saw little impact on the number of prospective students who applied. Indeed, some private colleges said that applications actually increased when they boosted prices, apparently because families equated higher prices with quality.
But that attitude has changed, in part because families’ income has 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, even as the share of students that depend on government help continues to rise. At public universities, federal loans fund a median of 40 percent of student charges; at private schools, the median is 21 percent.
Overall, 18 percent of private universities and 15 percent of public schools that responded to the survey projected a decline in net tuition revenue for fiscal 2013. A much larger share, about one-third, said net tuition revenue would decline or grow by less than 2 percent.
“Such weak revenue growth often means a college cannot afford salary increases or new program investments unless it cuts spending on staff and existing programs,” the Moody’s report said. By comparison, in fiscal 2008, only 11 percent of private schools and 9 percent of publics failed to grow tuition revenue by 2 percent or more.
Growing awareness of student debt has focused increased attention on the value and cost of higher education, which has risen faster than inflation for decades as a result of increased spending on administrators, financial aid and debt for new buildings, and higher costs for items that have impacted all businesses, like health care.
The Moody’s survey included 165 non-profit private universities and 127 responses from four-year public universities.
Colleges Expect Lower Enrollment
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Colleges Expect Lower Enrollment
