Moody’s downgrades outlook for nation’s colleges and universities

Colleges and universities have been forced to fight hard over the past few years to maintain funding while avoiding spikes in tuition and student fees. On Tuesday, credit rating bureau Moody’s announced that institutions of higher education across the board have had their ratings on the company’s index downgraded as the weakened economy begins to affect even the most elite schools.

The new report goes against previous financial outlooks Moody’s had predicted over the past two years, in which the majority of public and private colleges received negative ratings while the top-tier schools maintained their status as quality opportunities for potential investors.

In an article from The New York Times, spokesmen from Moody’s explained the decision,citing diminished prospects of revenue growth at many institutions due to many factors. Along with the national economy still struggling to come out of the recession, a “penny-pinching Congress” is likely to cut grants and federal student aid while colleges will have to make up the difference to attract potential students.

The report also cites increased pressure from consumer advocacy groups and the families of college students to put a pause on tuition hikes, which many schools rely on to fill budget gaps year after year.

“The sector will need to adjust to the prospect of muted revenue growth,” the report says. “Strong governance and management leadership will be needed by most universities as they navigate through this period of intensified change and challenge.”

Despite giving the majority of colleges and universities a negative outlook going into 2013, most of the nation’s top schools still enjoy the highest credit rankings, despite several factors that have brought down the overall value of many of the richest schools.

As median household income decreased over the past decade, the debt burden for students only increased,rising 55 percent since 2003, the report shows.