Moody's Projects Weak Growth in Net Tuition Revenue

November 19, 2015

Moody's Investors Service is projecting weak growth -- 2 to 3 percent -- in net tuition revenue in the next year. Such growth is a key indicator of financial health for many colleges and universities. In a report released Thursday, Moody's said that these levels are close to the inflationary expense increases faced by colleges, ending many years in which net tuition rates increased at higher levels.

Moody's said net tuition revenue remains "muted" for most of the sector because "a focus on affordability, flat or declining enrollment, and state-imposed tuition limits" restricts institutions' ability or willingness to raise tuition

The report found that first-year tuition discounting is nearing 50 percent for many private universities, although the most highly rated universities continue to maintain stronger pricing power than the sector as a whole. Conversely, Moody's found that private colleges with regional, instead of national, brands -- particularly in areas of the country where the number of high school graduates is declining -- have the least pricing power.

Lower enrollment levels are also contributing to lower tuition revenue growth at colleges and universities. Moody's found that 40 percent of universities estimate lower total enrollment for 2015 compared to 2010.

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