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California Association of Private Postsecondary Schools

Declines in Tuition Revenue Leave Many Colleges Financially Squeezed

01/11/2013

THE CHRONICLE OF HIGHER EDUCATION. JAN 10, 2013. A new survey of nearly 300 colleges and universities by Moody’s Investors Service shows that about one-third expect their net tuition revenue will either decline outright this year or increase at a rate that fails to keep pace with inflation, a sign of the continued financial pressure they face.

And for all public and private colleges surveyed, the median net tuition per student is projected to grow more slowly than it did the previous year.

For public institutions, the increase is projected to be about 2.7 percent. That’s notably lower than the average median increase of nearly 7 percent in the five previous years, a period in which public colleges gained revenue by raising their sticker prices and more heavily recruiting higher-paying students from out of state. “This year’s lower median increase is the result of reduced sticker-price increases as publics become increasingly sensitive to families’ ability to pay,” the Moody’s “special comment” on the survey says.

Private institutions, meanwhile, have experienced slowing growth in net tuition per student since 2008-9 because of lower sticker prices and higher spending on student aid to assist needy families, and as tool to attract more students.

Tuition revenue that is diverted to student aid makes up the “tuition discount,” and according to the new survey, 70 percent of private colleges project an increase in their tuition-discount rate this fiscal year, compared with 58 percent before the financial crisis.

Moody’s surveyed institutions whose credit it rates and received responses from 165 private institutions and 127 public ones.

Moody’s said the survey showed about 18 percent of private institutions and 15 percent of public colleges project outright declines in their net revenue. The credit-rating agency said those were about the same proportions projecting such tuition issues last year. In the year before the financial crisis hit, in 2008, only about 10 percent of Moody’s-rated institutions faced a similar problem.

Moody’s said the tuition pressures and modest enrollment declines reported in the survey were concentrated in colleges that are small, draw students from a narrow demographic and geographic pool, and are less-selective in admissions, but  “market-leading, diversified colleges and universities” with higher credit ratings “continue to fare better than the majority of the sector and are still seeing healthy student demand.”