S&P Global Ratings is keeping in place a negative outlook on the U.S. not-for-profit higher education sector’s bond rating stability for the fourth straight year and also has a negative outlook for universities it rates outside the country.
The ratings agency issued the outlook this week in an annual report on the higher education sector. Universities inside and outside the United States face short-term challenges because of COVID-19 that make enrollment, revenue, operating margins and recovery prospects uncertain, S&P determined.
“Many schools were having difficulty meeting enrollment and revenue targets pre-COVID. The pandemic has exacerbated those pressures and has forced a fundamental shift in business models for all,” Jessica Wood, S&P Global Ratings credit analyst, said in a statement. “While the effectiveness of vaccination will be critical to in-person class resumption, challenges facing the industry are not affecting all schools equally. Schools with weaker demand and financial profiles will have less operating flexibility and could face credit deterioration.”
The outlook from S&P comes after two other bond rating agencies last month issued pessimistic outlooks for the U.S. higher education sector in 2021.