Moody's Revises Higher Ed Outlook to 'Stable'

July 21, 2015

For the first time since it began providing a single outlook for all of higher education in 2013, Moody's Investors Service has given the enterprise a "stable" rather than "negative" assessment, the ratings agency announced Tuesday. The outlook, which projects the business conditions over the next 12-18 months for the 500-plus colleges and universities that the agency rates, projects that there will be no "material worsening or improving of business conditions" over that period, Edith Behr, one of the authors of the report, said in an interview. "We don't expect another shoe to drop."

The "stable" level at which economic conditions for higher education seem to be settling isn't a great one; operating revenue growth will sit just above the rate of inflation, at about 3 percent, Moody's says. But colleges and universities over all have done a good enough job containing costs, which along with solid investment returns, slightly growing spending by states and stabilizing net tuition revenue should be enough to help most colleges get through the period reasonably well.

Moody's is clear, though, that about 20 percent of the institutions it rates will struggle more than others, as it said in another report last week. And because Moody's only examines the institutions it rates, many of the most vulnerable small independent colleges are not fully captured in its analyses.

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