Two of our nation’s premier credit rating agencies, Moody’s and Fitch, have issued reports recently giving a negative outlook on the finances of American higher education. Of course, the financial condition of schools varies considerably: there are affluent ones with large cash reserves, billions in investments in their endowment, and robust demand for their services, while other schools are worried about where they will get cash to meet their payroll and pay their bills. I heard of one state school that was supposedly trying to sell buildings in order to meet its payroll.
The pessimism of the rating agencies seems justified. Total higher education enrollments in the U.S. have been falling for the last seven years, particularly concerning for the majority of institutions dependent on tuition fees for much of their operating funds. Most current college freshmen were born in or near the year 2000. The number of births in 2005 or even 2009 (potential students a few years from now) was less than it was in 1990. The lifetime fertility rate of American women is at a record low of around 1.8, well below the level needed to avoid long-term population decline in the absence of large-scale immigration. Moreover, anti-immigration attitudes and toughening visa requirements do not bode well for large increases in foreign-born students.