Moody’s higher hopes for #highered

What a difference a year has made for higher education.

It was only a year ago — in July 2014 — that credit-rating organization Moody’s Investor Services issued a negative rating for the U.S. higher education sector. Moody’s cited limited growth possibilities for higher education and continuing financial pressures as among the reasons for the grim outlook.

That all changed this week, as Moody’s upgraded its outlook for higher ed from negative to “stable.” The rating change “reflects our view that aggregate operating revenue growth for four-year colleges and universities will stabilize at a post-recession level of just above 3% over the next 12-18 months, providing some predictability in operating budgets for the first time since FY 2009,” according to Moody’s VP — Senior Analyst Eva Bogaty.

So, are happy days here again for higher education?

“Maybe it’s not worth throwing confetti about,” wrote The Washington Post about the latest Moody’s report, “but after years of volatility, some modest revenue growth and relatively low inflation will be welcome to college officials.”

I think we have reason to be cautiously optimistic for our sector. But the upgrade from negative to stable is no reason to become complacent. A 3 percent revenue growth isn’t necessarily anything to boast about, and as Moody’s reported, “this ‘new normal’ includes modest real growth in a low inflationary environment as well as constrained but consistent revenue improvements.” Moreover, Moody’s says, “pockets of stress will persist” in our sector as “roughly 20% of public and private universities experiencing weak or declining revenue growth.”

Just 2 1/2 years ago, as our nation was still trying to claw its way out of the Great Recession, Moody’s sounded its first alarm by giving higher education it’s first failing grade. As The New York Times reported at that time, “even the best colleges and universities faced diminished prospects for revenue growth, given mounting public pressure to keep tuition down, a weak economy and the prospect that a penny-pinching Congress could cut financing for research grants and student aid.”

I wrote back then that it was time for higher education “to take bold action” in order to reverse the course. It appears that higher education, still a relatively resilient if slow-to-change institution, did take action. Whether or not it was bold enough, time will tell. Challenges still remain, and adjustments for the long term have not yet had the opportunity to show what affect, if any, they might have.

Meanwhile, the economy has improved, and people still see higher education as a worthy investment.


Author: andrewcareaga

Higher ed PR and marketing guy. Communications director for Missouri University of Science and Technology (Missouri S&T) in Rolla, Missouri, USA. Slow runner, mediocre guitarist, lover of music and puns, and an avid St. Louis Cardinals fan. I blog and Tweet about #highered, #music, #gocards and #random stuff.

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