Credit Ratings for Colleges Are Foreseen as Stable in 2011

February 06, 2011

Public and private colleges' credit ratings should remain stable over all in 2011, despite cuts in state funds and "turbulence in the financial markets," according to a report on higher education released on Friday by Fitch Ratings, a credit-rating agency.

The report, available on Fitch's Web site, says college enrollments continue to rise even as institutions increase tuition and fees to make up for cuts in state support. Many institutions are focusing their fund raising on efforts to bolster student aid, an approach that has kept prices affordable and demand up, despite the tuition increases, the report says.

Smaller institutions are also investing their endowments more conservatively, according to a Fitch analyst, Colin Walsh, who spoke to reporters in a conference call. For example, he said, the colleges are freezing further investment in riskier ventures like private equity and real estate.

Fitch's assessment of the higher-education sector this year was noticeably more optimistic than a report released last month by Moody's Investors Service, which said the financial outlook for all but a few well-managed, highly diversified colleges and universities was negative this year, thanks to cuts in state funds and the end of federal stimulus money.