One Third of Colleges and Universities Expect Weaker Net Tuition Revenue Growth
November 26, 2013
In fiscal year 2013, about 17 percent of colleges and universities will see declines in net tuition revenue, while another 16 percent will have tuition and fee revenue increases of less than 2 percent, according to the Moody's Investors Service report, "More U.S. Universities Expect Tuition Revenue Declines; Larger, Diversified Universities Favored in Tough Higher Education Market." The report is based on enrollment and revenue projections collected from 515 higher education institutions for which Moody's has issued a bond rating. In FY 2008 only 20 percent of schools projected revenue growth below 2 percent.
The Moody's report lists several factors that are adversely affecting revenue at many colleges and universities, such as lagging growth in family income and net worth due to the slower-than-expected recovery from the Great Recession; uncertain job prospects for a growing number of recent graduates; and softening demand for higher education at current tuition and fee "sticker" prices. Additionally, tougher scrutiny of higher education expenses by policy makers and the general public is making colleges and universities reluctant to raise tuition and fee prices at the rates as they were rising in the recent past.
As a result, institutions overall are expecting tuition and fee revenue growth that will barely keep pace with inflation. On average, private nonprofit colleges and universities project a 2.6 percent increase in net tuition revenue per student from fiscal year 2012 to FY 2013, while public universities project a 2.7 percent gain. Inflation, as measured by the Consumer Price Index, grew 2 percent during this period. The FY 2013 increase in revenue for public institutions is far below the 6.7 percent average achieved over the past five years.
Revenue is falling because many schools now have falling enrollment. Approximately 46 percent of all universities report enrollment declines from fall 2011 to fall 2012. Much of this decline comes from decreases in graduate/professional students, as undergraduate enrollment is expected to rise by a median of 0.5 percent while graduate enrollment will decline by a median 0.4 percent.
Declines in revenue may be concentrated among institutions with smaller enrollments, which tend to be much more dependent on tuition and fees and are the most vulnerable to tuition pricing pressures. Larger universities generally continue to experience enrollment growth and revenue gains.
The full report is available only to subscribers to Moody's Investment Services publication. Subscribers may access more information by going to Moody's website.
Director, Research and Policy Analysis
- Implementation of Overtime Proposal Could Cost Schools Millions
- NACUBO Responds to GASB Exposure Drafts
- ED Corrects Cash Management Rules
- 2016 CAO and CBO Collaborations
August 1-2, 2016
- 2016 Planning and Budgeting Forum
September 19-20, 2016
- 2016 Managerial Analysis and Decision Support
November 17-18, 2016
- WEBCAST: The Clery Act: Strategic Planning to Mitigate Institutional Risk
Thursday, May 26, 2016 1:00PM ET
- ON-DEMAND: Title IX: Key Issues Surrounding Institutional Compliance
- ON-DEMAND: Containing Cost and Risk with Renewables – the Power Purchase Agreement Story
- ON-DEMAND: NACUBO Live! Higher Education Accounting Forum
- ON-DEMAND: Are Hedge Funds and Private Equity Right for You? An Analysis of Alternative Investments
- ON-DEMAND: Responsibility Center Management: Two Different Perspectives