Financial Outlook Improves for Colleges and Universities

A U.S. Higher Education In-Depth Sector Report issued July 6, 2015 by Moody’s Investor Services states that during 2014 the higher education sector showed signs of stabilization. The welcome news reported that balanced operations, moderate net tuition revenue growth, strong investment returns and strengthening balance sheets helped to ease financial pressures. The report noted, however, that large, wealthier institutions benefitted the most.

Moody’s reported that although at lower levels, growth in net tuition revenue is stabilizing for most universities and, for the first time in four years, median aggregate tuition growth exceeded median expense growth. Lower capital spending contributed to stable operations and stronger balance sheets, with many schools spending less than annual depreciation expenses in 2014.

The financial results highlighted a growing gap between larger, wealthier universities with nationally ranked programs, and lower-rated institutions that, after years of expense reductions, have fewer opportunities to cut any further.

Moody’s reported that the higher education sector continues to be challenged by student demographics, capital needs and national focus on tuition affordability.

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