If colleges and universities thought they could ride out the current revenue challenges by becoming more like some other institution, Moody's Investors Service has a bit of bad news for them: The grass isn't greener on anybody else's quad. Not even Harvard University's.
In a report released Wednesday, the ratings agency outlines how every traditional revenue stream for colleges and universities is facing some sort of pressure, a finding Moody's uses as grounds for giving the whole sector a negative outlook. The agency has been pessimistic about much of the sector since its annual outlook in 2009 after the economic downturn began, but Wednesday's report contains a downward shift in how analysts view even market leaders, the elite institutions with high demand and brand recognition.
The pressure on all revenue streams is the result of macro-level economic, technological and public opinion shifts, the report states, noting that these changes are largely beyond the control of institutions. Moody's analysts caution that revenue streams will never flow as robustly as they did before 2008. The change will require a fundamental shift in how colleges and universities operate, they say, one that will require more strategic thinking.
“The U.S. higher education sector had hit a critical juncture in the evolution of its business model,” wrote Eva Bogarty, the report’s author. “Most universities will have to lower their cost structures to achieve long-term financial sustainability and to fund future initiatives.”
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