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S&P Issues Negative Outlook for Higher Ed

January 17, 2020
 
 

The U.S. higher education outlook is negative, with more potential disruptions to credit than favorable opportunities, S&P Global Ratings said Thursday.

Top-tier institutions are thriving, with strong investment markets supporting endowment spending and fundraising, according to the ratings agency. State funding is also increasing. But many regional colleges and universities are staring at continuing challenges as they try to meet revenue and enrollment goals.

Risks include a shrinking pool of high school students, downward international enrollment trends, operating pressures, rising pension costs and economic growth forecast at less than 2 percent. Opportunities exist as fundraising and research remain strong, as institutions seek partnerships and as a low-interest-rate environment provides easy access to capital, however.

“We believe that schools' sustained enrollment and revenue pressures will continue to stress the lower end of the rating spectrum in 2020,” S&P said in a report on the outlook. “Our outlook for the sector remains negative for the third consecutive year, given the sector's challenging operating environment and our expectation that negative rating actions will outpace positive rating actions again this year.”

S&P’s negative outlook comes about a month after two rival ratings agencies, Moody’s Investors Service and Fitch Ratings, issued differing outlooks for higher education. Moody’s issued a stable outlook, while Fitch kept its outlook negative.

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