Interview
Financing Higher Education During a Time of Disruption
- Borrowing is expected to continue to refinance net debt and issue taxable debt for pandemic stress, following a recent $45 billion issuance split into two-thirds taxable and one-third tax-exempt markets.
- Fall delivery models will range from on-campus to hybrid and online formats based on state regulations, student demographics, and facility capabilities, with potential tuition reductions for online-only attendance.
- Auxiliary revenue from housing, dining, parking, and athletics faces pressure due to potential cancellations of fall football seasons by major conferences like the Pac-12 and Big Ten and a reduction in national championship events for remaining sports teams.
- Rating agencies express concern regarding financial stability for second- or third-tier public universities and smaller rural institutions facing declining K-12 populations and reduced enrollment flows.
- Institutions may cut programs, reconfigure facilities to accommodate remote work, merge with other entities, or monetize real estate and royalty streams to balance budgets amid shifting operational trends.
- Investor scrutiny will focus on campus opening strategies and the management of potential second waves of COVID-19, while a shift to hybrid or online learning could alter perceived value regarding the loss of on-campus community attributes.
- Student returns to campus may increase community germ spread, potentially serving as a leading indicator for city-wide infection trends.