Moody’s Downgrades Higher Ed’s Outlook From ‘Stable’ to ‘Negative’

The prospects for higher education are bleak, according to Moody’s Investors Service, a credit-rating agency that on Tuesday changed its outlook for the sector from “stable” to “negative.”

In a report, the agency cited financial strains at both public and private four-year institutions, mainly muted growth in tuition revenue. But it also cited “uncertainty at the federal level over potential policy changes.”

“The higher-education sector is highly exposed to changes in federal policy or funding,” the report said. “Changes to financial-aid programs and tax reform could negatively affect enrollment and tuition-revenue growth, philanthropic support, and the cost of borrowing.”

Both the House of Representatives and the Senate have passed legislation in recent weeks that would overhaul the U.S. tax code. The bills have been harshly criticized by higher-education leaders. Provisions particularly at issue include a tax on graduate students’ tuition waivers in the House version, and, in both the House and Senate versions, a 1.4-percent excise tax on the endowment earnings of some private colleges, and a doubling of the standard deduction, which critics argued would discourage charitable giving. (The Chronicle outlined the differences in the House and Senate versions here.)

Moody’s assigned the “stable” designation in 2015, citing expected increases in state funding and predicting that revenue growth would improve at four-year institutions. That was an improvement from the “negative” rating the agency had assigned since 2013. Copies of the report are available to Moody’s subscribers.

Adam Harris is a breaking-news reporter. Follow him on Twitter @AdamHSays or email him at adam.harris@chronicle.com.