More Colleges See Their Credit Ratings Downgraded

With declining endowment values and other financial problems, more colleges are seeing their credit ratings downgraded, The Wall Street Journal reported today.

Moody’s Investors Service has downgraded 20 colleges this year and has a negative outlook for the credit ratings of 55 colleges, the newspaper reported.

“That’s comparable to the rate of downgrades universities saw during the dot-com bust,” a managing director at Moody’s, John Nelson, said. “And we probably will surpass it.” A lower credit rating can increase the cost of borrowing, something a growing number of institutions are doing.

Earlier this week, Dartmouth College was downgraded from a AAA rating, the highest possible, to AA+ by Standard & Poor’s Ratings Services. The ratings service cited Dartmouth’s operating deficit, a decline in the value of its endowment, and its debt load as factors in the decision.

Other colleges whose credit ratings have been downgraded include Bard College, Drew University, High Point University, Ohio Northern University, the University of Central Arkansas, and Yeshiva University.

The increase in downgrades comes at the same time more colleges, including the highest-rated ones, are borrowing money to cover operating costs. According to Moody’s, 12 institutions with AA or AAA ratings have borrowed a total of more than $6-billion in recent months to meet their obligations. —Kathryn Masterson