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Moody’s: Higher Ed Is Failing

One of the world’s leading credit-rating agencies agrees with us that higher-ed has a serious revenue problem. Moody’s recently released a statement saying that it has given a negative grade to the entire higher-ed industry, citing “diminished prospects for revenue growth.”

As the New York Times notes, the recession has put a damper on the effectiveness of tuition hikes at raising additional revenue. Financial difficulties are forcing many families to take a second and third look at sticker prices when choosing a college for their children. Moody’s also warns that other potential revenue sources aren’t faring much better. The only solution?

“[B]older actions by university leaders to reduce costs and increase operational efficiency.”

“The sector will need to adjust to the prospect of muted revenue growth,” the report says. “Strong governance and management leadership will be needed by most universities as they navigate through this period of intensified change and challenge.”

These are troubling times indeed for administrators, but the struggles are actually a sign of good things to come for colleges. Necessity is the mother of invention, and universities are beginning to recognize the need to think creatively about new, more efficient ways to deliver services and attract new students. We’re already seeing this in the world of online education, as more and more traditional colleges dip their toes into the market, hoping to get a head start on the competition. Expect more to join as these pioneers discover which new business models actually work.

Ultimately, we will end up with something that is cheaper, more effective, or some combination of the two, but in the mean time: buckle up, because it’s going to be a bumpy ride.

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