“downside scenario assumes a slower economic recovery driven by prolonged or recurring coronavirus-related disruptions”
At this point, many people will shrug over this. Higher education is due for a reckoning.
Campus Reform reports:
Financial experts sound alarm on colleges going bankrupt
A new report from Fitch Ratings warned that declining revenue from tuition costs could threaten the financial solvency of private colleges.
As families of students struggle as a result of the coronavirus, colleges could be forced to discount their tuition rates to unsustainable levels, according to the report, even as the number of students enrolling at these colleges also decreases.
“For higher education,” the report said, “the base case assumes that most residential campuses will reopen for the fall 2020 session with enrollment declines of up to 10 percent. Fitch’s downside scenario assumes a slower economic recovery driven by prolonged or recurring coronavirus-related disruptions, including sporadic campus closures into 2021.”
“This scenario anticipates larger enrollment declines of up to 20 percent in addition to other operating and financial pressures, such as underperforming auxiliaries and weaker endowment financial performance,” the report adds.
A 10 percent enrollment decline would lead to an average revenue decline of 8 percent while a more severe 20 percent enrollment decline would result in an average revenue loss of 17 percent. Both, according to the report, would require offsetting measures.
“In a 5 percent decline scenario, about 65 percent of private colleges would maintain coverage in line with current rating levels. With a 10 percent decline, about 50 percent of institutions would maintain sufficient coverage, and at a 20 percent decline, just 15 percent would.”
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