Tuition Revenue Growth Expected to Slow

Growth in net tuition revenue is expected to slow in the 2020 fiscal year for both public and private universities, Moody’s Investors Service reported Monday.

Public institutions’ median annual net tuition revenue growth is projected at 1 percent, down from 1.8 percent last year. Private institutions’ median net tuition revenue growth is expected to be 2.3 percent, a decline from 2.8 percent. The projections come from surveys of institutions for which Moody’s provides bond ratings.

Flat enrollment, rising tuition discount rates and a focus on affordability are contributing to the limited net tuition revenue growth. This year, 27 percent of public colleges and universities are in line to have declining net tuition revenue per student as states emphasize affordability, low tuition and fee increases, and in some cases tuition freezes. Among private colleges and universities, 27 percent are in line to see net tuition revenue per student decline as well.

Net tuition revenue is a key financial indicator because it forms the cornerstone for most college and university budgets. Financial pressure mounts on an institution if its net tuition revenue does not rise as quickly as expenses or inflation.

Smaller institutions are likely to feel the most revenue pressure, according to Moody’s. Small institutions often enroll undergraduate students who are from surrounding regions. They are less able than large comprehensive universities to overcome local market conditions by attracting nonresident, graduate and international students.

“Overall enrollment is steady, but net tuition revenue growth at U.S. universities is relatively low,” said Patrick McCabe, a Moody’s analyst, in a statement. “This reflects demographic pressures within the higher education sector that have increased competition for students, as well as declining international student enrollment and flat graduate enrollment.”

Median net tuition revenue growth at private institutions exceeded growth at public institutions for the first time last year.