(Bloomberg) — Universities in the US are facing higher risk “across the sector” because of moves by the Trump administration, according to Moody’s Ratings, which lowered its outlook for the US higher education sector to negative from stable.
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Moody’s analysts said in a report on Tuesday that recent and potential federal policy changes “create a more difficult operating environment for colleges and universities.” The outlook reflects the ratings company’s view of credit fundamentals in the US higher education sector over the next 12 months and is separate from the outlook for individual schools.
The Trump administration is canceling $400 million in federal grants and contracts to Columbia University, citing complaints about antisemism from Jewish students. And in February, the Trump administration moved to cut certain federal funding for scientific research from the National Institutes of Health.
The cut to NIH funding has been challenged in court, but under the current proposal some research schools could lose over $100 million per year, the report said.
Wealthier institutions are also facing a potential increase to the endowment tax, which could force them to re-examine how they fundraise and use their investment proceeds. Meanwhile, layoffs at the US Department of Education could have an impact if there are disruptions to financial aid programs, according to Moody’s.
“Top-rated institutions with strong demand and significant financial resources are better equipped to handle these challenges than those with weaker brands and more limited financial resources,” the Moody’s analysts said in the report.
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