Private regional colleges will face stiff competition from public institutions, Moody’s predicts

Higher Ed Dive

Laura Spitalniak

April 26, 2024

Dive Brief:

• Private regional colleges with small student bodies and high acceptance rates will face increasingly stiff competition from public institutions as higher education braces for widespread demographic challenges, according to a new analysis from Moody’s Ratings.

• These issues will be particularly pronounced in the Midwest and Northeast, where the fight for a shrinking pool of students is expected to heat up. Moody’s analysts predicted higher education enrollment would plummet in these two regions in the coming years, citing a 2020 report from the Western Interstate Commission on Higher Education.

• Driving up costs, small private colleges have increased spending on employee salaries and student wellness services since the start of the pandemic, Moody’s said. Analysts also noted that “maintaining small class sizes has become more expensive.”

Dive Insight:

The number of high school graduates is expected to sharply fall beginning next year due to a drop in birth rates during the Great Recession. The decline in traditional-aged college students means institutions — especially tuition-dependent ones — will be forced to adapt.

Moody’s analysts examined colleges rated by the firm that had student acceptance rates of 60% or more and student bodies of 3,000 or less. The financial well-being of these institutions depends heavily on enrollment, with an average of 71% of their budgets relying on tuition and auxiliary revenue in fiscal 2023, the firm said.

“Exacerbating the race for enrollment are the many strong state institutions that also compete for students in these regions, often with much lower tuition costs than what the private universities can offer,” Moody’s said.

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