With enrollment prospects dim, Fitch predicts lower ratings

Fitch Ratings’ 2024 outlook for higher education enrollment is fairly bleak, according to data offered during an online presentation Thursday.

Emily Wadhwani, Fitch’s senior director for U.S. higher education, cited demographic declines as a primary factor, especially in the Northeast and Midwest; she said certain states, including Maine and Pennsylvania, have been particularly hard hit. She also said public doubt in the value proposition of a college degree was eating away at the remaining enrollment potential.

While higher ed’s economic outlook improved slightly since last year, Wadhwani said burgeoning expenses—in the form of rising labor costs as well as persistent inflation and the subsequent increase in utilities and materials costs—made enrollment struggles all the more damaging, especially for tuition-dependent private institutions. She also said stagnant or declining state support was making public institutions more reliant on enrollment increases, which were largely not materializing.

The projections are in line with Fitch’s December report, which warned that higher ed’s economic standing was “deteriorating,” thanks in no small part to languid enrollment.

While the agency held relatively stable ratings for most institutions throughout the pandemic due largely to federal relief aid, Wadhwani said continued post-pandemic woes would likely lead to worse ratings for more institutions next year.

“The winner-take-all dynamic will become more pronounced,” she said. “We’re going to see more bifurcation between institutions, and that bifurcated area will likely widen.”

The institutions that have shown resilience or adaptability are those that recognized the need for “programmatic flexibility” and invested in specific offerings that could distinguish them in a crowded field, Wadhwani added. She said she expects more institutions to make “difficult choices” in the coming year, reorienting their budget priorities and cutting costs from areas that do not show returns.

Wadhwani also commented on the potential impact of yesterday’s Supreme Court decision on admissions, warning that the steep drop in underrepresented students in states that previously banned race-conscious admissions could be replicated on a national scale. But she noted that most institutions have been working “quietly and strategically” to revise their admissions policies and predicted that the overall effects of the affirmative action ban will be “muted.”