Moody’s downgrades financial outlook for colleges to ‘negative’

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Moody’s downgrades financial outlook for colleges to ‘negative’

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Thanks to revenues that can’t keep up with expenses and potential changes in federal policy, higher education’s financial outlook has been downgraded by Moody’s.

Moody’s Investors Service has downgraded its financial outlook for the higher education industry from stable to negative.

The altered outlook was made as Moody’s expects operating revenues at four-year colleges and universities will be unable to keep pace with expenses in 2018. Aggregate operating revenue at four-year schools is expected to increase next year by 3.5 percent, but expenses are likely to increase by about 4 percent, according to a Moody’s report released on Tuesday.

“A growing number of universities will have even weaker revenue growth, pressuring operating performance,” the report states.

Revenue from tuition, research funding and state appropriations are all expected to continue declining, the report states. Public universities will likely be harder hit than private colleges, according to the report.

Moody’s also cites ongoing uncertainty from the federal government. Changes in financial aid programs and tax reform could work to further negatively impact enrollment, tuition revenue growth, donations and the cost of borrowing, according to the report.

“The higher education sector is highly exposed to changes in federal policy or funding,” the report states.

The Moody’s shift on the higher education industry as a whole comes just months after the investors service specifically downgraded Wright State University’s credit rating as the school tries to recover from its financial crisis. In March, Moody’s decreased Wright State’s rating from A2 to Baa2 based on the college’s “severe financial deterioration in a short period of time.”

In June, Wright State’s board of trustees slashed more than $30.8 million from its 2018 budget in an attempt to correct years of overspending.

WSU is not the only area school to suffer financially.

Historically black Central State University and Wilberforce University have both reported financial problems in recent years. In 2015, Wittenberg University cut around $6.5 million to help balance its budget.

Antioch College in Yellow Springs closed in 2008 before reopening in 2011 because of financial problems. Urbana University, which was on the brink of closing, was bailed out and acquired by Columbus-based Franklin University in 2014.

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