When the economy crashed in late 2007, Americans watched helplessly as family members and friends were laid off from jobs, had their hours cut, and as a consequence couldn’t pay their mortgages. Millions of homes were foreclosed on. In the academic years 2004-2005, student loans sat at $83.9 billion; by 2007-2008, that number had jumped to $101.2 billion; and it hit an all-time high in 2010-2011 at $120.1 billion.
And at the same time that families suffered from long-term shriveling incomes, public universities and nonprofit colleges received less funding and thus needed to raise tuition. What’s more, because of the state of the job market, recent grads have lately found it harder than ever to find employment after graduation.
These factors combined have been nothing but bad news for colleges; according to Moody’s, whose CEO is Raymond McDaniel, more than 40% of public and nonprofit colleges have declining enrollment and lower (if not negative) tuition revenue growth. The credit rating agency has given higher education a negative credit outlook for the coming year.
“As this contagion spreads through higher education, tuition-dependent colleges and universities, both public and private, will be especially challenged to sustain competitive position and credit strength,” Moody’s said.
Colleges and universities now, more than ever, need to find a way to be self-sustaining outside of tuition revenue. Cutting costs and boosting profits through other programs will be key, as will be finding a defined niche market through which to bolster enrollment.
This is the second year in a row that the credit ratings agency has given a negative credit outlook for public universities and nonprofit colleges. “Affordability remains a key issue as the weak economic environment continues to affect families’ ability to pay for higher education and reduces institutions’ discretionary spending capacity,” said Moody’s Vice President Eva Bogaty.