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Dive Brief:
- Fitch Ratings raised its outlook for U.S. colleges to stable Wednesday as institutions plan for mostly in-person instruction in the new academic year, revising what had been a negative view of the sector.
- The credit ratings agency cited improving application numbers, a solid state budget picture and the possibility that auxiliary and student fee revenue could improve as campuses reopen.
- But Fitch expects highly selective and flagship research universities to be better positioned to handle future challenges than smaller institutions, which may have fewer financial resources and face weaker demand in some markets.
Dive Insight:
The upgrade to stable bodes well for colleges seeking to borrow money and for the financial health of the sector generally. Fitch expects institutions to largely be resilient despite ongoing operating stresses.
Still, the move can’t be taken as a sign that every college is on a clear upward financial trajectory. At the end of June, about 5% of Fitch’s ratings outlooks — which signal the direction of an institution’s credit profile — were positive, 13% were negative and the rest were stable. That’s better than the end of the 2020 calendar year, when only 1% of the agency’s actions had a positive rating outlook.