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Education Dive
Report: Tuition revenue growth slows at public, private colleges
Jeremy Bauer-Wolf
Nov. 11, 2019
Dive Brief:
Both private and public colleges will see a marginal bump in tuition
revenue for the 2020 fiscal year, according to a forecast from ratings
company Moody's Investors Service emailed to Education Dive.
Median net tuition revenue will grow 1% for public universities and
2.3% for private colleges in that year, Moody's reported. This is a
drop from fiscal 2019, when the company reported a 1.5% increase for
public universities and a 2.8% increase for private institutions.
The discount rate for first-year students at private universities rose
to 51% for fall 2019, which Moody's notes along with flat enrollment
will limit net tuition revenue growth.
Dive Insight:
Moody's latest annual look at how much money institutions collect from
tuition follows its recent findings that continued competition for
students and a strong focus on containing their costs would further
constrain tuition revenue, despite improved state funding. And it marks
the continued trend of some colleges bringing in lower levels of
tuition revenue.
For its latest survey, Moody's received responses from 170 private
nonprofit universities and 127 public institutions in the U.S.
Although tuition revenue growth is sluggish, overall enrollment is
stable, driven by gains at national public universities, Moody's
reported.
International student enrollment was down, with public universities
reporting a median decrease of 3.7% among those students for the fall
of 2019. Administrators and pundits have attributed this to the Trump
administration's strict visa vetting and strained foreign relations.
The number of high school graduates, meanwhile, has remained flat,
Moody's noted. It added that a favorable economy is drawing potential
students into the workforce.
For nearly two-thirds of public universities, net tuition revenue
growth is not expected to exceed 3%, which is Moody's proxy for
inflation in the higher education sector, during fiscal 2020.
Large, comprehensive public institutions are faring better than their
smaller peers due to better brand recognition that allows them to draw
nonresident students and offer a wider variety of programs, Moody's
notes. Those larger schools are projected to increase net tuition
revenue by 2% versus 0.5% and 1%, respectively, for medium- and
small-sized public universities.
Tuition freezes in response to public pressure to lower students' costs
could hamper tuition revenue growth. The promise of more state aid is
also a motivating factor. Virginia's public colleges, for instance,
will not raise in-state tuition this academic year in exchange for more
state funding.
Revenue at private institutions is also at risk amid efforts to lower costs through per-student discounts, Moody's notes.
One in four private universities responding to the Moody's survey said
they discounted first-year students' tuition by 60% or more. Private
schools' expected median discount rate of 40.6% for 2020 represents a
14% increase from 2015, according to Moody's.
Meanwhile, a survey of 400 colleges by the National Association of
College and University Business Officers earlier this year projected
that tuition discounts for first-time, full-time first-year students at
private nonprofits would reach a record 52.2% in 2018-19.
Resetting sticker prices also may also make private colleges vulnerable
to lower tuition revenue. A recent study of 24 private colleges that
reset tuition found that only two-thirds recorded an increase in
first-year enrollment two years later.
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