Moody’s downgrades higher ed financial forecast

The outlook for the U.S. higher education sector is universally grim, according to a new analysis by Moody’s Investor Services.

The credit rating agency has maintained a stable outlook for research universities and a negative outlook for all other universities since 2009. But earlier this week, Moody’s downgraded its outlook for all of higher education, issuing an across-the-board negative verdict.

A Moody’s spokesperson cited poor revenue prospects as the reason for the negative outlook.

“The U.S. higher education sector has hit a critical juncture in the evolution of its business model,” said Eva Bogaty, assistant vice president of Moody’s, in a statement. “Even market-leading universities with diversified revenue streams are facing diminished prospects for revenue growth.”

Other factors include the nation’s poor overall economic outlook and soaring levels of debt among struggling college graduates. According to the report:

“While employment and earnings data continue to support the underlying value of a college degree, alarm over a potential student loan bubble and diminishing affordability of higher education has reached a fever pitch in the last two year.”

The report also noted that massive open online courses (MOOCs), which students everywhere can take for free, would greatly disrupt the higher education market in the future, presenting both challenges to current revenue models and opportunities for new growth.

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