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Announcement:

Moody's: Slow tuition growth supports continued negative outlook for US higher education in 2015

Global Credit Research - 01 Dec 2014

New York, December 01, 2014 -- The outlook for four-year US colleges and universities in 2015 remains negative, as is it is for community colleges that issue revenue bonds, says Moody's Investors Service. Among the four-year colleges, a major pressure will be slow growth in tuition revenue, while declining enrollment is driving the negative outlook among community colleges.

For the four-year colleges, net tuition revenue growth in 2015 will be the weakest in over a decade, says Moody's in "2015 Outlook -- US Higher Education: Slow Tuition Revenue Growth Supports Negative Outlook." The low revenue growth coupled with mounting expenses will contribute to weaker operating performance.

"However, against the backdrop of challenging business conditions, there are signs of emerging stability, including overall strong student demand and balance-sheet strengthening," says Moody's Kimberly Tuby. "But because most colleges rely heavily on student charges, net tuition growth matching the pace of industry inflation would be necessary for a stable outlook."

Heavily tuition-dependent private colleges and universities with weaker market positions and regional draws will be increasingly challenged because of the restricted revenue growth, says Moody's. In contrast, the elite and wealthy private colleges and universities will outperform the rest of the higher education sector over the next 12 -- 18 months, given more diverse revenues and business models linked to philanthropic support.

Research funding for universities will decline on an inflation-adjusted basis as result of federal budget pressures. At the same time, most universities with academic medical centers are benefiting from the relationships with their hospitals as their performance shows sustained improvement.

In 2015, Moody's expects state funding for public universities to grow, based on initial state budget proposals. However, state appropriations per student will remain below what they have been historically, and higher education funding will continue to compete against other state priorities.

Among the community colleges that issue revenue bonds, net tuition per student will grow at less than 3% in 2015 and 2016. State funding, on the other hand, will grow moderately, given political support for these institutions that match important state policy objectives, says Moody's.

Moody's outlooks reflect its expectations for the fundamental business financial economic conditions in a sector over the next 12 -18 months.

For more information, Moody's research subscribers can access "2015 Outlook -- US Higher Education" at

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1000311..

"2015 Outlook - US Community Colleges with Revenue Bonds: Declining Enrollment Drives Negative Outlook is available at .

http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_1000731

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Kimberly S Tuby
VP - Senior Credit Officer
Public Finance Group
Moody's Investors Service, Inc.
60 State Street
Suite 700
Boston, MA 02109
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Kendra M. Smith
MD - Public Finance
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's: Slow tuition growth supports continued negative outlook for US higher education in 2015
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