On January 16, 2013, Moody’s Investor’s Service, the bond credit rating business, issued a “negative short-term outlook” for the entire sector of higher education. The bleak forecast for the next 12-18 months includes all forms of higher education, including community colleges and top-tier research universities.

Eva Bogaty, the credit-rating agency’s assistant vice president and analyst, noted that the report is not “doomsville,” but it does indicate challenging times ahead for all schools.

The report attributed the negative forecast to five factors:

• Depressed family incomes and household net worth have suppressed net tuition growth.
• Revenue sources are strained; financial diversity no longer helps colleges.
• Rising student debt and default rates have hurt perceptions of the value of a diploma.
• Public and political scrutiny has increased the risk of more regulation.
• Colleges face a challenging future without strong leadership and better governance.

Does your board need to have a serious discussion about all five factors (particularly the fifth)?

Read more about the report in the Chronicle of Higher Education. If you’re a Moody’s subscriber, read the full report.


Guest post by Emilie Babcox.
Image by Benson Kua.