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Moody’s downgrades outlook of U.S. higher education

While Moody’s Corporation reported Wednesday that the outlook for U.S. higher education in 2013 is negative, and growth will likely decline, a number of Boston University students said they are not worried.

Moody’s, a New York-based credit rating and research organization, surveyed more than 500 colleges and universities and determined the credit conditions for the next 12 to 18 months in higher education are grim, said Moody’s spokesman David Jacobson.

“For the last couple years, we have had a stable outlook on the market-leading research universities and a negative outlook on the other universities,” Jacobson said. “What happened this year is we’ve determined the entire sector — both research driven and the smaller universities — are both negative, and what that means is that the growth rate is going to decelerate.”

The Wednesday report downgraded the rating for all American higher education.

“Most universities will have to lower their cost structures to achieve long-term financial sustainability,” the Moody’s release stated.

“Universities have been restraining costs in response to the weak economic conditions since the 2008-2009 financial crisis, but they have only recently begun examining the cost structure of their traditional business model.”

Moody’s divides schools into two groups, research-driven universities and smaller universities mostly reliant on tuition, Jacobson said.

Possible national budget cuts and student loan defaulting contributed to the downgrading, Jacobson said.

“Some of it is economic, [so] obviously there is a lot more price sensitivity that is suppressing some net tuition revenue growth,” Jacobson said. “Other revenue sources are also strained I would say. As you know, there is a rising student load burden in the country, defaults are going up a bit, and that is affecting the value of a college degree.”

Jacobson said tuition revenues will likely decrease in coming years.

“The rising burden of loans on students and increase in student loan defaults is also negatively impacting universities, leading more people to question the value of a college degree,” the Moody’s release stated. “Most universities remain well below the threshold for being cut off from federal aid because of the rate of students default.”

Students likely will not see major repercussions, Jacobson said.

“One thing that is possible is that the universities might slow down in some of the tuition inflation that has been happening over the past few years,” he said. “That’s good for students, but at the same time the universities don’t have as much money coming in as they did before.”

School of Management professor Kathryn Griner said she agrees the downgrade is unlikely to affect students.

“No, I don’t think it will really affect students much,” said Griner. “It’s probably good for most universities and I would think eventually good for most students.”

Hali MacDonald, an SMG sophomore, said she is not worried about the downgrading.

“It might make things more difficult for the school but I can’t say that I would be upset if tuition didn’t increase,” she said. “BU gets money from a lot of other places, so maybe they can afford less money from us.”

College of General Studies sophomore Carlos Mariscal said he assumes that BU will take care of any financial issues in the future.

“I don’t think that most students are worried about the debt of the school,” he said. “I’m way too worried about the debt that I’ll have after graduating.”

Gary Putera, a College of Arts and Sciences senior, said he did not know about the report, but the results are not surprising.

“That’s what they talked about in the election,” Putera said. “The way the economy is, it makes sense that universities are not doing that well.”

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