Improved Liquidity for Higher Ed

May 13, 2011

The economic downturn of fall 2008 left many colleges -- even wealthy institutions -- with cash flow problems, as their suddenly sagging investments were anything but flexible in providing money in the short term. A new report from Moody's finds that most colleges have recovered and are in much healthier condition with regard to liquidity. "Liquidity risks have stabilized for most universities nearly two years after unexpected cash shortages caused fifteen highly rated private universities to borrow more than $7 billion in taxable debt to bolster their liquidity," says the report's summary. "The healthy liquidity position of most U.S. colleges and universities has also aided bank liquidity facility renewals for the sector thus far in 2011. Nevertheless, significant uncertainty remains for some universities that face potential liquidity risks from variable rate debt structures, weak tuition pricing power, investment volatility and cuts in government funding."

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