TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, April 19, 2014

Small Colleges Battle Death Spiral as Enrollment Drops

Bloomberg:  Small U.S. Colleges Battle Death Spiral as Enrollment Drops:

Moody’s, which rates more than 500 public and private nonprofit colleges and universities, downgraded an average of 28 institutions annually in the five years through 2013, more than double the average of 12 in the prior five-year period. Dozens of schools have seen drops of more than 10 percent in enrollment, according to Moody’s. 


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I'm not sure, in our miserable economy, that 28 downgrades out of 500 constitutes a death spiral. Given the administrative bloat at most major universities, they should be able to compete on cost, offering a more personalized and focused education for less.

Posted by: Michael W. Perry | Apr 19, 2014 5:56:42 AM

@Michael Perry,

Institutional weakness is not only revealed by downgrades. Overreliance on student loan dollars, which may or may not continue to have the ubiquity of hydrogen atoms in the future, ever-diminishing state support, drying-up reservoirs of full boat-paying foreign students, endowments that are too restricted and way too heavily concentrated in opaque and/or illiquid derivatives, ABSs, timberlands, etc. There are many ways for colleges to skirt death without an official downgrade by Moodys or S&P. Harvard, for instance, had financial troubles extending waaaay beyond its endowment drop back in 2008-09; troubles that had it borrowing billions at fairly terrible terms to stay cash solvent. I believe it is on the hook to repay creditors some $11 billion between 2009 and 2019. I don't recall it ever being downgraded.

Posted by: Unemployed Northeastern | Apr 19, 2014 4:32:13 PM