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Covid-19 putting pressure on higher education finances

The coronavirus outbreak will negatively affect higher education for the next year as universities worldwide grapple with lower student demand and lost income, Moody’s Investors Service @MoodysInvSvc said in a report published recently.

“We expect rated universities in all of our current jurisdictions – UK, US, Canada, Australia, Singapore and Mexico – to enrol fewer students for the next academic year than planned, due to the outbreak,” said Jeanne Harrison, VP-Senior Analyst at Moody’s.

“In addition, if campuses remain closed for part of the year, income from residence halls, catering, conferences and sporting events will be lower than budgeted. Endowment and gift income may also decline.”

Public US universities are at higher risk than their global peers due to potential government funding cuts and lower investment income, which accounts for a higher percentage of income than for global peers. While the ability to shift teaching and assessment online varies, in general, students and academic staff have transitioned to online teaching and assessment and most rated universities will receive full or near full tuition fee income for the remainder of the current academic year.

The duration of the outbreak will influence the magnitude of the credit impact: if university campuses can reopen in time for the next academic year, the effect on demand and budgets will be more manageable. International student flows will depend on the how the outbreak and policy response evolve in individual countries, with the US and China the most influential. Most rated universities rely heavily on Chinese students, who account for 23% of international students worldwide.

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