Two ratings agencies offered differing opinions Tuesday on the future of the U.S. higher education sector.
Moody’s Investors Service raised its U.S. higher education outlook from negative to stable as it sees steady revenue streams, solid reserves and strong operating performance at large comprehensive universities bolstering the sector over the next year to 18 months. Fitch Ratings kept a negative outlook in place, predicting continued operating pressures as challenges persist from a moderate number of students graduating from high school, limited public funding levels and slowing tuition growth.
The slightly more dovish outlook from Moody’s is a change from recent years, when that ratings agency pointed to factors such as hypercompetition, constraints on net tuition revenue growth and rising expenses when labeling the sector with a negative outlook. Many of those challenges remain for a significant slice of the sector, according to Moody’s, but they are being offset by alternative revenue streams like state funding, endowment income, gifts, research grants and income from academic medical centers that will help prevent conditions from declining materially.