Enrollment pressures from the coronavirus pandemic will likely bear down on colleges and universities unevenly, according to a report released yesterday by Fitch Ratings that says private colleges are likely to be more affected than public institutions because they rely more heavily on tuition and fee revenue.
Fitch expects annual enrollment declines ranging from 5 percent to 20 percent for many colleges and universities this fall. Private colleges in competitive regions and those that are already experiencing weak demand are likely to be more affected than institutions that draw students from a wider geographic range and collect revenue from more types of sources.
The ratings agency evaluated likely effects on revenue of enrollment declines of 5 percent, 10 percent and 20 percent. Most colleges and universities Fitch rates can absorb a 5 percent enrollment decline, it found. An enrollment drop of 10 percent would mean a median estimated revenue decline of 4 percent, while a decline of 20 percent would mean a median revenue decline of 9 percent. Both of those scenarios are expected to require offsetting measures for institutions to keep their current bond ratings intact.
Median debt burdens would rise significantly if enrollment drops by 20 percent. Under the scenario of a 20 percent enrollment drop, about a fifth of private colleges would need a 5 percent expense reduction. Under that scenario, lower-rated institutions would be the ones mostly likely to need to reduce expenses by 15 percent or more.
The analysis did not include changes to athletics revenue, occupancy levels or student mix.
Fitch’s report provides a different perspective than a report from Moody’s Investors Service last week that predicted enrollment could increase between 2 percent and 4 percent across higher education based on historic patterns during economic downturns. That Moody’s report still found net tuition revenue and student-related revenue could drop by between 5 percent and 13 percent next year under different scenarios as students substitute higher-priced colleges for lower-priced institutions and struggle to pay for college amid the economic downturn.
Meanwhile, different private colleges have reported both strength and struggles this admissions season.