Moody's Ratings has downgraded its outlook for the higher education sector from stable to negative, citing significant ramifications from recent federal policy changes under the Trump administration. These changes include potential cuts to research funding, potential enforcement against diversity programs, and uncertainties regarding federal student aid. Additionally, proposed changes to the endowment tax would particularly impact wealthy private universities. This downturn follows Moody's earlier optimistic outlook for revenue growth, as the current situation indicates looming revenue shortfalls, especially at research-intensive institutions.
Actions and potential changes include cuts to research funding, enforcement actions against diversity programs, staff reductions at the US Department of Education, uncertainty over federal student aid, and possible expanded taxes on endowments.
Now the ratings agency notes federal policy changes could prompt revenue shortfalls, particularly at research universities, due to a proposed cap on National Institutes of Health reimbursements for research-related costs.
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