Monday, July 14, 2014

Higher education in the news (and it's not good)

First, this story from the New York Times dealbook reporting that companies offering to help students manage their educational loans (a/k/a the "debt settlement industry") are often predatory.

Then there's this story from the Chronicle of Higher Ed reporting that Moody's, which ranks creditworthiness, has issued a negative outlook for the higher education sector of the economy for the next 18 to 20 months.  Beyond that, Moody's predicts a more positive outlook based on strong long-term demand for higher ed but between now and then, many schools may face the following pressures:

  • Growth in tuition revenue remains stifled by affordability concerns, legislative ceilings on tuition levels, and steep competition for students.
  • State financing of higher education will increase, on average, just 3 to 4 percent—not enough to meet the growth in expenses.
  • Already stiff competition for sponsored-research dollars is getting stiffer, with success rates for proposals dropping from 19 percent in 2008 to below 15 percent last year.
  • One in 10 public and private colleges is suffering “acute financial distress” because of falling revenues and weak operating performance.
  • Public colleges will begin to feel the impact of underfunded pensions and health benefits for retirees.
  • Most public colleges and many private ones will be unable to achieve a 3-percent annual growth rate in operating revenue, Moody’s benchmark for sustainable financing at a time of low inflation.

Continue reading the CHE story here.


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