Tip Sheet

EWA Tip Sheet: Reporting on Colleges’ Finances Amid Coronavirus

This post was originally published on Journalist’s Resource. It has been republished here with permission of the author. 

Colleges across the country face deep financial losses after the coronavirus forced school officials to shutter campuses and cancel events. Administrators worry their money troubles will only get worse if enrollment, government funding and other sources of revenue continue to fall amid a likely recession.

In the coming months, news outlets will monitor colleges’ finances and how administrators respond to the crisis, with particular attention to the largest and most prestigious institutions and those struggling most. To help journalists prepare, the national Education Writers Association held a webinar in April with college finance experts from Moody’s Investors Service, one of the for-profit agencies that determines credit ratings for public and private colleges and universities.

Participants who contributed to this advice:

  • Susan Fitzgerald, associate managing director of public finance for Moody’s Public Finance Group
  • Michael Osborn, vice president — senior analyst for Moody’s Public Finance Group
  • David Jacobson, vice president of communications for Moody’s Public Finance Group

Main points of the presentation

The coronavirus pandemic and shrinking U.S. economy will continue to impact colleges’ various revenue streams. Expand your coverage beyond shifts in student enrollment and shrinking income from tuition, on-campus housing, dining halls and parking fees.

  • State funding, endowment proceeds and private donations all could fall in fiscal year 2021, which begins July 1, Fitzgerald said. Budget reserves likely will take a big hit, as will revenue generated by athletic events such as football games.
  • Meanwhile, Fitzgerald said some costs have increased as schools moved online. Converting traditional courses to virtual ones can be expensive and labor intensive, requiring software, technology and security upgrades as well as assistance from instructional designers and multimedia experts.

Keep in mind that public universities, community colleges and private institutions might be affected differently. The amount of time physical campuses stay closed will influence budgets across the higher education industry.

  • Moody’s predicts public universities will face greater financial challenges in the coming months than private colleges and universities. That’s partly because public institutions tend to rely heavily on state funding, which could be cut during the next fiscal year, Fitzgerald explained. The size of an institution also matters. “Larger ones are more resilient than smaller ones,” she said.
  • Some schools — community colleges in particular — could see enrollment rise. During the 2008 recession, community college enrollment swelled as people went back to school to learn new skills, switch careers and take courses to complete a degree they had been putting off. Community colleges, known for their workforce training and applied science degree programs, are less expensive than universities and admit students with a wider range of academic abilities.
  • But as the country heads into what’s likely to be the deepest recession in decades, Fitzgerald said it’s tough to know what will happen with enrollment. “The real question is consumer behavior,” she explained. “It’s really hard to predict because you have two countervailing forces — a health crisis on top of [an economic crisis].”
  • A few weeks ago, Moody’s reported that if campuses can reopen in time for the 2020-21 academic year, “the effect on [student] demand and budgets will be more manageable.”

Keep an eye on changes to colleges’ credit ratings, an indicator that the financial health of an institution has improved or worsened.

  • Credit ratings tell banks and investors the likelihood that a business or government will repay a debt. These ratings are expressed as a letter grade, ranging at Moody’s from an Aaa down to a C. Moody’s assigns an Aaa — referred to as a triple-A rating — to organizations that, according to its analysis, have the strongest capacity to fulfill their financial commitments.
  • The major credit rating agencies that regularly assess colleges are Moody’s, Standard and Poor’s and Fitch Ratings.
  • Before the coronavirus began to spread, some U.S. colleges already were struggling financially and the number of colleges that had their credit ratings downgraded by Moody’s outpaced the number receiving upgrades. In 2019, for example, Moody’s lowered the credit ratings of almost 25 schools and raised ratings for fewer than 10, according to data presented at the webinar.
  • On May 1, Moody’s issued a report announcing rating downgrades for several higher education institutions, including Central Michigan University, Worcester Polytechnic Institute in Massachusetts and the William Paterson University of New Jersey.
  • Moody’s, S&P and Fitch make their ratings public and do not charge for the information. Moody’s also announces new reports and analyses on Twitter at @MoodysUSPubFin.

Data Sources

Familiarize yourself with organizations and online platforms that provide financial data.

Depending on what information journalists seek, they might need to go to different places to get data on different kinds of schools. Here are some key sources of data on colleges’ finances. All provide important context.

  • The National Center for Educational Statistics publishes detailed reports on current and past student enrollment as well as enrollment projections across the higher education industry. It also offers data showing how tuition and student housing costs surged over the decades.
  • Grapevine is an annual compilation of data on state funding for public institutions, produced by the Center for the Study of Education Policy at Illinois State University in cooperation with the State Higher Education Executive Officers Association.
  • Journalists can get financial statements, disclosures, default notifications and other information on any school that has issued any debt from Electronic Municipal Market Access, a service of the Municipal Securities Rulemaking Board.
  • If you’re looking for financial data on a private, nonprofit school, go to Guidestar or ProPublica’s Nonprofit Explorer to look up its IRS Form 990. Most organizations claiming federal tax-exempt status must file this form annually. The document contains details on such things as number of employees, assets, liabilities, compensation for top administrators and income collected through various revenue streams, including tuition, grants, fundraising activities and student auxiliary services such as student housing.

Story Ideas

Read credit opinion reports and financial statements. Pay attention to the footnotes.

  • Osborn recommended journalists aim to answer three critical questions: Is the institution running a budget surplus or deficit? Have its revenues risen, fallen or remained steady over time? How have expenses changed?
  • When reviewing a college’s financial statement — many schools post them online — he suggested scrutinizing its assets and liabilities as well as its revenues and expenses.
  • Ask rating agencies for a copy of the credit opinion it compiled for the college or college system you’re interested in. This report explains analysts’ assessment of the school or system, based on factors such as its reputation, relationship with local and federal governments and pension obligations.

Remind audiences that while a few colleges have closed recently, most are resilient.

  • News coverage tends to focus on the schools struggling most. Jacobson noted that journalists also are much more likely to report on downgrades of college credit ratings than upgrades. “People sometimes see these small schools that are in trouble and they get the incorrect feeling that this is what’s happening to all of higher education and that’s not the case,” he said.