Excerpt from...

Lower tuition rates may mean more downgrades in FY 2020

By Sarah Wynn
Nov 18, 2019

Some analysts have decided to stick with highly rated bonds in the higher education sector.

“The higher education area, depending on if it’s public or private has seen some declines (in enrollment) over the years, especially in the private colleges,” said Patricia Healy, senior vice president of research and portfolio manager at Cumberland Advisors. Private universities have seen more downgrades than public universities, Healy later added.

Healy said Cumberland looks for double-A and higher single A-rated bonds because high-quality bonds tend to be more liquid and the firm tends to take a more active strategy.

Healy said her firm stopped investing in many private colleges years ago due to the continuing decline in enrollment. Healy said a decline in enrollment can be a reflection of a good economy because people are going directly into the workforce.

Universities, public and private, that have big endowments and solid reputations are doing fine, Healy said. For public universities, it depends on how much state appropriations they are allotted.

“States want to make sure there’s higher education for the people in their state that they can afford so that’s why they do the state appropriations,” Healy said.

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