January 11, 2013

HIGHER EDUCATION BUBBLE UPDATE: COLLEGES LOSE PRICING POWER:

Facing stagnant family income, shaky job prospects for graduates and a smaller pool of high-school graduates, more schools are reining in tuition increases and giving out larger scholarships to attract students, Moody’s concluded in a report set to be released Thursday.

But the strategy is eating into net tuition revenue, which is the revenue that colleges collect from tuition minus scholarships and other aid. College officials said they need to increase net tuition revenue to keep up with rising expenses that include faculty benefits and salaries. But one-third of the 292 schools that responded to Moody’s survey anticipate that net revenue will climb in the current fiscal year by less than inflation. . . .

The financial pressures signal that many schools are starting to capitulate to complaints that college has become unaffordable to many American families, observers say. At least two dozen private colleges froze tuition this fall, roughly double the previous year’s total.

“It’s pretty clear that pricing power of colleges has reached an inflection point,” said John Nelson, a managing director at Moody’s who oversaw the survey team.

Can I say “I told you so?” Because, you know, I did.