Moody’s upgrades higher ed outlook as more colleges eye a return to campus

Dive Brief:

  • Moody’s Investors Service bumped its outlook for the higher education sector from “negative” to “stable,” citing improved revenue prospects as colleges plan to bring more students back to campus this fall.
  • The credit ratings agency is counting on colleges reviving their income streams from room and board and other auxiliary services. Improved state revenue forecasts are also a boon.
  • Many colleges have said they plan to begin the coming academic year in person, but that depends on vaccine uptake and coronavirus mitigation.

Dive Insight:

Moody’s downgraded the higher ed sector’s outlook from stable to negative last March, shortly after colleges nationwide began to shift online in response to the pandemic. At the time, the credit ratings agency predicted widespread financial pressures and “unprecedented” enrollment uncertainty. 

A year later, the forecast has brightened. With more students living and studying on campus, Moody’s analysts wrote, colleges can expect more income from tuition and fees. 

Further, strong financial market performance stands to boost endowment values, payouts and donations.  And federal and state support could provide some cushion. 

Although it accounts for only a sliver of the sector’s revenue, the combined $77 billion in direct federal relief to colleges “will go a long way” toward offsetting expenses added and income lost because of the pandemic, Moody’s noted. A large share of that funding must go toward student emergency grants. Meanwhile, state revenue fared better than expected, helped in part by federal appropriations. That will help stabilize public colleges, the report explains. 

But a return to campus hinges on the vaccines being able to help get the pandemic under control, analysts wrote. That requires widespread distribution and uptake of the shots. So far, only around 25% of the U.S. population has had at least one dose, according to one estimate updated this week. It suggests that the vast majority of people could be partially vaccinated by mid-summer. Still, the pandemic’s intensity and local restrictions are expected to vary and could affect colleges’ ability to have students on campus, the analysts wrote.

Many colleges, including large flagships and systems, have said they plan to have more in-person instruction this fall. But their announcements generally acknowledge that the state of the pandemic and public health guidelines will be the deciding factors.

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