Moody's points to uncertainties for private colleges

Moody’s Investors Service issued a report last week called “Private College and University Medians,” based on fiscal year 2007 financial data and Fall 2007 enrollment data from 267 (95 percent) of its rated private colleges and universities. As The Chronicle of Higher Education (subscription required) has reported, Moody’s remains cautious about the outlook for fiscal years 2008 and 2009 despite the sector’s improvement in key credit factors for 2007, given recent pressure on investment performance, ambiguity in the student loan market, and a substantially weaker economic environment. Our examination of the report reveals these figures for 2007 among the private institutions rated by Moody’s:

• Median yield rate remained relatively constant at 31.1 percent
• Median enrollment grew 1.3 percent
• Median net tuition per student rose 5.8 percent to $17,635
• Total tuition discount rate decreased slightly to 29.9 percent

However, Moody’s warns that future tuition revenue growth will experience significant pressures due to “the impact of tightening lending standards in the student loan market (for private loans), less access to home equity as a source of tuition payment, and weaker consumer confidence.” This analysis echoes what “Marketplace Money” economics editor Chris Farrell and other presenters told our Summer Seminar attendees last month, as you can see in the June 2008 Lawlor Focus.