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Wired Campus: Moody’s Says MOOCs Could Raise a University’s Credit Rating

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Moody’s Says MOOCs Could Raise a University’s Credit Rating

By  Sara Grossman
June 24, 2013

The spread of massive open online courses, or MOOCs, is “credit positive” for universities that offer them but “credit negative” for a majority of lesser-known institutions that lack a prominent brand name, according to a report published on Monday by Moody’s Investors Service.

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The spread of massive open online courses, or MOOCs, is “credit positive” for universities that offer them but “credit negative” for a majority of lesser-known institutions that lack a prominent brand name, according to a report published on Monday by Moody’s Investors Service.

The announcement comes a year after the credit-rating agency predicted that MOOCs could improve the financial prospects of large research universities while presenting challenges to smaller institutions and for-profit colleges.

The latest report, available only to Moody’s subscribers, says that, among other things, MOOCs offer colleges and universities increased global brand recognition, new revenue opportunities, and a chance to improve instruction methods. The report also warns that smaller liberal-arts institutions could be left behind, as they lack the resources to compete with better-known universities.

Karen Kedem, a vice president and senior analyst at Moody’s, emphasized that being credit positive or negative does not mean an actual change in credit rating, but is merely a comment on the potential impact of massive online courses on an institution’s credit rating. She said no university had had its credit rating downgraded for not offering a MOOC.

In May, Moody’s announced that the Georgia Institute of Technology’s MOOC-like master’s degree in computer science is credit positive for the university. That report cited increased brand recognition and the potential to increase and diversify enrollment and revenue as major factors in the decision.

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Moody’s also predicted that while Georgia Tech’s low-cost computer-science degree might in some ways detract from in-class offerings, its greater enrollment would make up for any financial losses.

Ms. Kedem said that the Moody’s analysis of Georgia Tech stemmed from the university’s leading market position in offering the new program, but she added that it was still too early to predict the success of such offerings.

“While things have developed rather rapidly, we can’t pretend to have a crystal ball and fully understand the credit implications to a particular university,” Ms. Kedem said. “While we feel this is generally positive for the industry, our analysis is done on a case-by-case basis. It’s really the governance and management that will help guide how this advancement affects a given university.”

“Many colleges will likely be left out as industry stratification intensifies,” the report predicts. “Many smaller colleges will not have the brand name or star faculty to join a network or attract students.”

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