Higher Education Business Plans In Crisis

Ann McClure's picture
Thursday, February 28, 2013

The investor service Moody’s has revised its outlook for the entire higher education industry to negative.

Moody’s previously had a negative rating on small colleges and universities. The new negative rating also includes giant research universities with numerous revenue sources including tuition, research grants, endowments, philanthropic gifts and in some cases hospital revenue.

“We don’t think there’s a higher education bubble, but there’s some question about the value of a college degree,” said Moody’s spokesman David Jacobson.

Investors seek advice from Moody’s when deciding whether to invest in the bond debt issued by universities. Bond proceeds can fund buildings, such as new libraries and recreation centers. Broadly, the negative rating means Moody’s is concerned about whether some universities can pay back those debts.

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