Fitch: Negative Pressures Continue Into 2021 for Higher Ed

October 29, 2020

Fitch Ratings expects any changes to the higher education debt it rates to be predominantly negative into 2021 as the coronavirus pandemic has exacerbated existing revenue and enrollment pressures, it said in a commentary circulated Wednesday.

The ratings agency cited preliminary data indicating enrollment across U.S. colleges and universities fell 3 percent this fall versus last year. That’s better than a 5 percent to 10 percent decline Fitch had been expecting. But enrollment changes varied by institution type and by student level, with first-time students declining by 16 percent.

“We expect more highly selective and flagship research universities to weather these challenges due to stronger demand profiles and greater revenue diversity,” the commentary said. “Some smaller, rural campuses that preserved or even grew enrollment are also bright spots, likely benefitting from the perceived safety and institutional trust of their student base. However, other private colleges with limited financial strength may face steep budget cuts and outsized use of reserves, and have borne the brunt of most negative rating actions to date in 2020.”

Fitch expects a median 2.5 percent revenue decline at private institutions for the 2020 fiscal year. It anticipates a median revenue decline of about 3 percent for public institutions for the 2021 fiscal year.

“Large expense reductions will lag into fiscal 2021, including cuts to staff, supplies and capital, and will increase in magnitude if net revenues remain pressured,” the commentary said.

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