S&P warns higher ed faces a difficult 2015

Students demand more value just as costs are rising

A new report forecasts a difficult year for higher education as administrators struggle to balance rising costs with the demands of more value-conscious students.

The warning comes from Standard & Poor's Ratings Services (S&P), which argues the challenges could cause management shakeups at some schools. S&P analyst Jessica Matsumori says "this competitive landscape is beneficial to students but financially challenging for colleges."

Specifically, students are demanding more amenities—such as private rooms and fitness centers—just as schools are grappling with rising costs. Compounding the issue is the pressure colleges feel to discount tuition in order to compete for students in a buyer's market.

These pressures are showing up in schools' finances. S&P notes that the ratio of downgrades to upgrades for debt issued by schools increased in 2014. "Institutions face an expensive contest to attract and retain the best students," says Matsumori.

"We expect to see a growing number of leadership changes due to both the aging of current senior leadership teams and strategic changes that may require different expertise and skills than an institution's current management possesses," she cautions (Respaut, Reuters/Yahoo News, 1/15).

The takeaway: S&P warns colleges that pressure from rising costs and price-sensitive students could cause another difficult financial year and changes in administrative leadership.

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