Private Colleges Fear Decrease in Net Tuition

January 5, 2012

While most colleges predict an increase in net tuition revenue for the 2012 fiscal year, a small group are pessimistic about their chances to grow revenue greater than financial aid, according to a survey released Wednesday by Moody's Investors Service. According to the study, 18 percent of private and 17 percent of public universities expect a decrease in net tuition revenue next year. Those numbers are similar to expectations last year, though only 13 percent of privates and 8 percent of publics actually experienced a decline. Lower-rated private colleges (Baa and below), which tend to have smaller enrollments, a more regional draw, smaller endowments, and competition from lower-cost public options, were the most likely to say they would see a decrease in net tuition revenue next year. No institution rated Moody's highest (Aaa) expected a decline in net tuition revenue.

Since the outlook is weak for other revenue sources, such as state funding, private gifts, and research grants, Moody's analysts say colleges need to pay particular attention to growing tuition revenue if they want to maintain in strong financial position.

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