More US Colleges Are at Risk of Closing or Merging, Fitch Says

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(Bloomberg) — More colleges and universities in the US are headed for closures or mergers, with enrollment declining across higher-education institutions, according to Fitch Ratings Inc.

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A handful have already shuttered or combined with others so far this year. Alliance University in Manhattan’s financial district said it will wind down its courses as of Aug. 31 while Medaille University in Western New York held its final commencement in May. On July 1, Bloomfield College in New Jersey merged with Montclair State University, concluding a roughly two-year search for a partner to help the school avoid closing due to financial challenges.

Enrollment declines as well as pressures on tuition and student fee growth prospects have been a common thread among the downgrades that Fitch has meted out so far in 2023, Emily Wadhwani, a senior director at the firm, said in a report on Wednesday. The ratings company said half of its below-investment-grade ratings on higher-education entities carry a negative outlook, indicating that they risk being downgraded.

Read More: New York College Liquidation Reveals Depth of Higher-Ed Distress

“Credit implications will continue to be informed by an institution’s ability to correct structural deficits, the level of financial flexibility through this period of sector contraction, or the ability to find an effective partner,” Wadhwani wrote. “Colleges will need to pro-actively make decisions on what programs, departments, capital plans, and assets they believe best fit their organizational and strategic goals.”

Moody’s Investors Service also said in June that it expects closures of colleges and universities to gradually increase as they grapple with financial difficulties, though such actions will still remain relatively rare.

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