Moody’s predicts stiff challenges for colleges this year

January 6, 2009 01:39 PM Email| Comments (0)| Text size – +

By Peter Schworm, Globe Staff

Colleges are said to be recession-proof, but this economic downturn will be the exception, a new report from Moody's Investors Service predicts.

"While higher education was more insulated than other municipal market sectors from prior recessions, this is not likely to be the case this year," said Moody's vice president Roger Goodman, author of the report, which was released today. "Given the particular risks facing US higher education at this time, we also believe that public institutions may fare somewhat better than private ones."

Colleges and universities will experience worsening credit conditions for at least the next year, the report forecasts, and will face several intense financial risks, include increased pressure on tuition and financial aid, the broad impact of investment losses, and volatile debt markets.

"2009 will be a year of re-evaluation of underlying assumptions for endowment management, tuition pricing strategies, and risk management," Goodman said. "The nature of the current risks also contribute to why public institutions, both four-year institutions and community colleges, are likely to be somewhat less pressured than private institutions."

The report notes that colleges have emerged from previous recessions relatively unscathed, but that families will likely have a much harder time paying tuition costs this time around because of sharp declines in household net worth and reduced access to private student loans. Still, Moody's predicted that colleges would not experience dramatic enrollment declines.