Don’t Panic … Yet

College administrators are justifiably worried about whether they're going to be able to balance their budgets in a changing economic landscape, and a survey released by Sallie Mae last month didn't do much to put them at ease.

The report’s headline finding is that spending on colleges — a number that includes parent and student income and savings, federal and private loans, grants and scholarships, and money from friends and relatives — by traditional-aged students and their families dropped over the past two years, a 13 percent decrease between 2009-10 and 2011-12.

A 13 percent drop in spending across all institutions types would represent a dramatic shift in the market indicating that large numbers of students and families had chosen less-expensive institutions over costlier ones, opted to live at home instead of on campus, or made other choices that cut their own spending — and, in turn, colleges' revenues. That is revenue that tuition-dependent institutions of all types would have a hard time replacing.

Prompted by the Sallie Mae study, Moody's Investors Service said in a July report that "[l]ower spending on U.S. colleges translates to slow net tuition growth, which is credit negative for colleges and universities because it impedes revenues. The impact varies across institutions, but it’s particularly acute for small- to mid-sized and moderately selective private colleges that are highly dependent on annual increases in tuition.”

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