Declining enrollment, state tuition caps and affordability concerns are among the drivers of what Moody’s Investors Service is calling a “new normal” for U.S. colleges – minimal year-over-year growth in net tuition revenue, or the amount colleges make off tuition after distributing financial aid.
Moody’s said in its annual tuition survey that it expects last year’s 2-percent growth rate – the weakest in the survey’s history – to continue into the next academic year. About two in three public universities will see less than 3-percent growth in fiscal year 2016, though the financial impact will be partially offset by increased state funding.
Many private universities, meanwhile, are offering even higher discounts, with freshmen paying a little more than half of listed tuition. Less recognized colleges and those with niche markets, like law schools, facing the most pressure to keep prices low.
There’s also a geographic element to the new normal: While universities in the South and West are projecting stronger tuition revenue growth due to large and growing populations, lower high school graduation rates in the Northeast and Midwest have left those institutions more vulnerable.
International students could provide a financial buffer for some of those institutions. Those students comprise just 7 percent or so of U.S. college enrollment, but universities with strong national and global brands are still working to lure those who have the ability to pay full tuition.