There’s an ongoing debating about the actual value of higher education. Countless articles and studies depict the declining return on investment for students and families. Simply put college graduates are not generating enough income to justify their expensive degrees.
In the same way, some universities are also struggling to manage their finances. To highlight the universities having some of the biggest issues, we took a look at those with the lowest credit ratings… and we were pretty surprised by who we found.
What’s in a credit rating?
A university is just like a large company, or country. It borrows money frequently to cover its operating costs like salaries of the professors, maintenance, maintaining the dormitories, making sure the library is stocked, and keeping the sports program in tip top shape.
In order to finance these and new projects like the addition of new buildings or the development of new curriculum, universities issue bonds. The bonds are then traded on public markets to raise capital. For investors and lenders to know how worthy (or unworthy) the institution is, credit rating companies like Moody’s and Standard & Poors issue them a score.
Moody’s is the current leader in the university credit rating industry. It examines the finances of nearly all the 4,495 title-iv degree granting universities in the United States. According to its estimates only 11% (500) of the total number of universities are currently financially stable enough to stave off economic, demographic and technological shifts.