U.S. Not-For-Profit Private Universities' Fiscal 2014 Median Ratios: Demand Is Stable But Flat Margins Signal Stress

Transcription

1 U.S. Not-For-Profit Private Universities' Fiscal 2014 Median Ratios: Demand Is Stable But Flat Margins Signal Primary Credit Analysts: Carolyn McLean, New York (1) ; Ashley Ramchandani, Chicago (1) ; Secondary Credit Analysts: Jessica A Matsumori, San Francisco (1) ; jessica.matsumori@standardandpoors.com Laura A Kuffler-Macdonald, New York (1) ; laura.kuffler.macdonald@standardandpoors.com Research Assistants: Phillip A Pena, San Francisco Ryan Quakenbush, Chicago Table Of Contents Ratios Help Measure Credit Quality Enrollment And Demand Medians Provide Context Financial Medians Provide Perspective Financial Resource Ratios Measuring The Debt Burden Related Criteria And Research JULY 10,

2 U.S. Not-For-Profit Private Universities' Fiscal 2014 Median Ratios: Demand Is Stable But Flat Margins Signal Demand and financial medians for U.S. private colleges and universities shifted slightly in fiscal 2014, reflecting ongoing affordability concerns as well as benefits from stronger investment returns. A historically stable sector with about 90% of ratings affirmed each year, the sector saw more rating actions and outlook revisions than previous years (see "Upping The Ante: Costs Of Luring Top Students Keep The Outlook Negative On U.S. Not-For-Profit Higher Education Sector", published Jan. 15, 2015). While the absolute number of rating changes in 2014 was similar with that of 2013, the ratio of downgrades to upgrades increased for the fourth consecutive year. The number of institutions with negative outlooks (11%) is still more than double that of institutions with positive outlooks (5%), while 84% of all rated institutions have stable outlooks. Based on our analysis of the sector's medians, Standard & Poor's Ratings Services expects continued rating pressure, particularly at the lower end of the rating scale, because of persistent operating stress and a delayed recovery from the Great Recession. Overview Demand medians in 2014 were relatively stable to slightly improved. Enrollment rose, reversing several years of contraction. The number of credits remained relatively stable compared with a year earlier. Endowment values continued to increase due to financial markets' strong performance in fiscal Operating margins were relatively flat in The key median indicators in 2014 were increased endowment market values, strengthened financial resource ratios, and relatively flat net operating income margins. We believe that flat margins reflect affordability concerns, combined with increased competition for students. Although the sector has been stable for the past 10 years, the need to address declining revenue while still funding financial aid to maintain student affordability will compress overall operating performance and could strain financial resources. Although investment returns were strong in fiscal 2014, operating performance remained relatively flat compared with the prior year. As in past years, universities to continue to implement viable expense controls and modifications to tuition and financial aid strategies to improve their bottom line. The increase in balance-sheet strength will not have an immediate impact on the bottom line, in our opinion, because of smoothed endowment spending rules and the small percentage of endowment support for operations for most of our rated universities (excluding the 'AAA' and high 'AA' credits). As expense controls reach optimization, universities will be challenged to achieve sustainable operations. JULY 10,

3 Ratios Help Measure Credit Quality Demand and financial ratios are pivotal in measuring the credit quality of U.S. higher education institutions. We calculate means and medians to assess the financial and operational health of individual institutions, gauge industry-wide trends, and produce meaningful comparisons of rating categories (see table 1). We publish these medians as general benchmarks and means to observe industry trends. Credit analysis for any particular institution involves the assessment of many unquantifiable risks that are not included in this article. These medians should not be considered thresholds to achieve a particular rating. Our ratios fall into two main categories: enterprise and financial. From a very broad perspective, the ratios provide a clear picture of the difference in credit fundamentals between rating categories. Both enterprise and financial metrics are highly correlative with credit quality, and the differences become more distinct over time. Table 1 Selected Financial Ratios for Private Colleges And Universities In Fiscal 2014 Rating AAA AA A BBB Speculative grade Sample size Demand FTE enrollment Median 11,628 3,749 3,434 3,318 2,251 Mean 11,030 9,458 5,916 4,414 2,998 Undergraduates as a % of total enrollment (%) Median Mean Freshman acceptance rate (%) Median Mean Freshman matriculation rate (%) Median Mean Retention rate (%) Median Mean Five-year graduation rate (%) Median Mean Average SAT score for entering freshman Median Mean JULY 10,

4 Table 1 Selected Financial Ratios for Private Colleges And Universities In Fiscal 2014 (cont.) Financial performance Net adjusted operating margin (%) Median Mean Revenue diversity Student-generated revenue (%) Median Mean Grants and contracts (%) Median Mean Gifts and pledges (%) Median Mean Investment and endowment income (%) Median Mean Financial aid and expense ratios Financial aid burden (%) Median Mean Tuition discount (%) Median Mean Instruction expense (%) Median Mean Endowment Endowment market value ($000s) Median 8,362,082 1,163, ,129 64,256 25,980 Mean 12,442,368 2,077, ,045 88,761 37,480 Debt ratios Total debt outstanding ($000s) Median 1,452, ,800 90,765 55,019 47,303 Mean 1,974, , ,675 83,586 54,995 MADS burden (%) Median JULY 10,

5 Table 1 Selected Financial Ratios for Private Colleges And Universities In Fiscal 2014 (cont.) Mean Current debt service burden (%) Median Mean Average age of plant (years) Median Mean Financial resources ratios Cash and investments to operations (%) Median Mean Expendable resources to operations (%) Median Mean Cash and investments to debt (%) Median Mean Expendable resources to debt (%) Median Mean Full-time equivalent ratios Total debt per FTE ($) Median 138,973 66,356 29,094 18,088 21,440 Mean 178,117 83,676 36,280 21,231 26,323 Endowment market value per FTE ($) Median 1,166, ,752 62,288 19,978 13,113 Mean 1,227, ,152 89,034 26,775 23,448 We began presenting sector-wide ratios for select indicators in fiscal Although most of the ratios do not indicate meaningful trends in the past year, endowment market values and financial resource ratios strengthened considerably in fiscal This is due to continued solid market returns for most university investment portfolios in fiscal The sector-wide median for tuition discounting also increased over the last four years, which further highlights the sector's persistent response to student affordability concerns. We believe that tracking median ratios over time will help identify industry-wide, rather than category-specific, trends (see table 2). JULY 10,

6 Table 2 Selected Financial Ratios For Private Colleges And Universities In Fiscal 2014, 2013, 2012 Fiscal Year Demand FTE enrollment Median 3,344 3,274 3,206 Mean 6,163 5,956 5,918 Undergraduates as a % of total enrollment (%) Median Mean Freshman acceptance rate (%) Median Mean Freshman matriculation rate (%) Median Mean Retention rate (%) Median Mean Five-year graduation rate (%) Median Mean Financial perfomance Tuition dependence (%) Median Mean Financial aid and expense ratios Tuition discount (%) Median Mean Endowment Endowment market value ($000s) Median 173, , ,265 Mean 1,127, , ,500 Total debt outstanding ($000s) Median 87,252 84,300 84,752 Mean 315, , ,412 MADS burden (%) Median Mean JULY 10,

7 Table 2 Selected Financial Ratios For Private Colleges And Universities In Fiscal 2014, 2013, 2012 (cont.) Current debt service burden (%) Median Mean Average age of plant (years) Median Mean Cash and investments to operations (%) Median Mean Expendable resources to operations (%) Median Mean Cash and investments to debt (%) Median Mean Expendable resources to debt (%) Median Mean The sample size for our private college and university ratios stayed relatively stable over the past year with minimal shifts in the number of credits per category. Our speculative-grade category previously experienced growth due to downgrades from the 'BBB' category as well as new credits rated at the lower end of the credit spectrum. However, the speculative-grade category decreased by one credit in fiscal Overall, the distribution of ratings remains relatively stable, with the majority of ratings (69%) in the 'A' and 'BBB' categories. We believe this indicates overall stability in the private higher education universe (see charts 1, 2, 3, and 4). JULY 10,

8 Chart 1 JULY 10,

9 Chart 2 JULY 10,

10 Chart 3 JULY 10,

11 Chart 4 Enrollment And Demand Medians Provide Context Our analysis of a private institution's enterprise profile includes full-time equivalent (FTE) enrollment and undergraduate enrollment by category. We also assess the correlation between the rating categories and admissions flexibility, using acceptance and matriculation rates and student quality. We believe that important indicators of student success and university effectiveness are retention and graduation rates, which we find typically correlate with student quality. Enrollment trends In the past few years, we have observed flat to declining enrollment at many universities, which we believe indicates a highly competitive landscape, as well as unfavorable demographics, particularly in the Northeast and Midwest. In fiscal 2014, there was a modest reversal of enrollment trends. FTE enrollment increased modestly across all rating categories except 'AA' rated institutions, whose median enrollment increased 18%. We believe that some of the modest growth in FTEs is due to a proliferation of nontraditional undergraduate and graduate programs. The significant increase in the 'AA' category was due to movement within that category and the addition of several universities with larger enrollments (see chart 5). JULY 10,

12 Chart 5 In our view, enrollment at higher-rated institutions remains diverse, with undergraduates comprising less than one-half of students in the 'AAA' category. Many are major research universities with substantial graduate and professional programs. Notably, undergraduates as a percentage of total enrollment increased modestly across all categories, with the exception of the 'AA' category, which declined by two percentage points. We believe the stable trend of undergraduates as a percentage of enrollment and growing FTE indicates that universities are growing their traditional and nontraditional enrollment as a strategy to increase revenues. Demand and student quality Selectivity and matriculation remained relatively stable across the categories, other than a slight weakening of matriculation in the 'A' category. We believe that this is due to the ease of applying through the Common Application and subsequent increase in the number of schools to which each student applies, but also to so-called financial aid shopping. Affordability and competition continue to be key factors as universities recruit new students. Like past years, selectivity is highly correlative to credit quality. The highest-rated institutions have the most competitive acceptance rates (11%), with each successive rating category becoming less selective. However, matriculation rates varied across the rating scale. The rate remained flat in the 'AAA', 'AA', and 'BBB' categories and improved for the speculative-grade category. In contrast, matriculation declined slightly in the 'A' rating category. We JULY 10,

13 note that 48% of 'A' rated institutions are located in highly competitive markets in the northeast demonstrating that matriculation is still weakest in the most competitive markets. Student quality, freshman retention, and five-year graduation rates often correlate directly with rating level. We believe that strong student quality partially insulates a school from decreased demand. As the most selective group, the 'AAA' rated institutions often attract students with the highest standardized test scores (see table 1). In 2014, the national average SAT score for incoming freshmen was 1010, while median SAT score in the 'AAA' category was Although a significant amount of federal grants have been dedicated to improving retention and graduation rates, we believe these new programs will not meaningfully affect either the ratios for several years (see table 1). Strong retention and graduation rates help universities attract students and parents, but also provide more predictable tuition income and reduce reliance on new students for revenue. Student quality remained relatively flat across all rating categories with the exception of speculative-grade institutions, which saw an improvement. Financial Medians Provide Perspective Our analysis of a private institution's financial strength includes an assessment of revenue and expense composition, financial operating performance, financial resources, and debt burden. Revenue diversity and operating margins Revenue diversity is important for the credit standing of a private university as it provides a shield against vacillating enrollment trends and volatile market conditions. It is difficult to achieve such diversity given that nontuition revenue is most often derived from gifts, grants, and contracts, and endowment income. These alternative revenue sources are typically developed over time and built through relationships with alumni, federal agencies, and other donors. As a result, revenue diversity remains the strongest for the 'AAA' category and decreases as credit quality weakens. The sources of such revenues favor institutions with a focus on research, a strong and wealthy alumni base, and a significant endowment. We believe that revenue diversity can also be achieved through an assorted program or student mix, which are more difficult to measure from audited financial statements. With the exception of student dependence, revenue diversity distribution shifted across rating categories in fiscal 2014 due to an increase in endowment income as a percentage of total revenue across all categories. Student dependence, as measured by tuition and fee and auxiliary revenue, remained relatively flat relative to fiscal 2013 as a percentage of revenues in all rating categories. The 'AAA' rated institutions on average had a relatively small portion of their revenue derived from tuition and fees with a 26% median, while speculative-grade issuers remained the most highly tuition-dependent at 78% (see chart 6) with the other categories falling in between. JULY 10,

14 Chart 6 Strong market performance during fiscal 2014 resulted in endowment growth across all rating categories; consequently, institutions across all ratings categories experienced increased dependence on investment and endowment income. With the exception of 'AAA' rated and speculative-grade institutions, gifts and pledges comprised a relatively stable to slightly decreased percentage of overall revenues. The'AAA' rated institutions on average had a decreasing portion of their revenue derived from grants and contracts, for a median of 17.8%. In contrast, 'AA' institutions experienced an increase in grant and contract revenue, achieving a median of 5%. The lowest rating categories generally have very limited grants and contracts revenue. We believe that the decline in the 'AAA' category is a result of a constrained federal grant environment and we expect that these levels will remain relatively flat in the next few years. We included median and mean ratios in each category for operating margin starting in fiscal 2012 to provide a relative measure of operating strength (see table 3). We believe the slight margin improvement is directly correlated to the implementation of expense-cutting plans at many universities and growth in endowment values due to favorable market conditions. Many universities now have more modest endowment spending rates that are in line with more conservative estimated long-term market returns. Operating margins are less correlative to rating categories unless combined with other measures such as revenue diversity and financial resource ratios. All medians are positive on a JULY 10,

15 generally accepted accounting principles basis, indicating that many universities are budgeting for operating surpluses on a full-accrual basis, which we consider best practice, and that operating deficits are an offsetting factor to an institution's financial profile. Table 3 Median Net Adjusted Operating Margin (%) AAA AA A BBB Speculative grade (0.8) Financial aid and tuition discounting For private universities to remain competitive, financial aid strategies are key in motivating students to matriculate. We measure financial aid in two ways: as a discount rate (financial aid/gross tuition and fees) and as a financial aid burden (financial aid expense/adjusted operating expenses). Our analysis also focuses on growth in net tuition revenue (gross tuition less financial aid expense) year-over-year, which we believe indicates sustainability of most universities' key revenue source. In the highest-rated universities, the discount rate is higher than in the other categories, with a median of 39.6% in fiscal At the same time, the financial aid burden is the lowest of any category at just 10.2%. We believe these two ratios indicate greater expense flexibility for 'AAA' rated universities, complemented by a higher degree of revenue diversity and endowment income providing significant funding for financial aid. By comparison, unfunded discounting of tuition rates is more prevalent for lower-rated schools. Many highly rated institutions use tuition discounting to provide access to education for students who are qualified regardless of their ability to pay (need blind admissions) -- a luxury most lower-rated institutions cannot afford. As credit quality weakens, the tuition discount rate tends to decrease, but the financial aid burden on a school's operating budget increases. In fiscal 2014, overall tuition discount rates increased across all rating categories other than the 'AAA' category, which decreased by two percentage points (see table 1). Recent increases in tuition discount rates, while modest, are indicative of the sector's struggle to balance the demands of student affordability and access with relatively flat revenue. We expect this budgetary pressure will persist and could further strain financial resources, particularly at lower-rated institutions. Balancing student quality, enrollment growth, and financial aid will likely confine growth in net tuition revenue. In fiscal 2014, the financial aid burden remained relatively flat in all rating categories compared with fiscal We believe flat median financial aid burdens illustrate management teams' continued efforts to balance students' needs, competitive forces, and budgetary pressures while attempting to maintain net tuition revenue growth. Endowment Many institutions' endowments market returns were strong in fiscal 2014, exceeding fiscal 2013's solid returns. Endowment market values grew in each rating category, with median growth ranging from 11.1% to 15.5%, except for JULY 10,

16 endowments of speculative-grade median, which grew 69.6% in fiscal 2014 (see charts 7 and 8). The shift in the speculative-grade category is due to the addition of new slightly larger universities, rather than a reflection of annual market returns. The median endowment market value for institutions in the 'AAA' category was $8.36 billion, up 15.5% from fiscal The National Association of College and University Business Officers (NACUBO) reported average market returns of 15.5% in fiscal 2014 (see the 2014 NACUBO-Commonfund Study of Endowments published Jan. 29, 2015). In our consolidated universe, we saw a robust increase of 17.2% in endowment market value medians fromr the previous year. Although returns were higher than the NACUBO study, we believe our calculation reflects various fiscal year-end dates and inconsistencies in endowment market value reporting in audited financial statements. The NACUBO study covered more than 850 institutions, while ours included just 269. Chart 7 JULY 10,

17 Chart 8 Financial Resource Ratios Financial resource ratios strengthened markedly across all rating categories in fiscal 2014, primarily due to continued strong market performance, as well as limited new-money debt issuances. Financial resource ratios are paramount to our analysis as they reflect the relative strength of a university's balance sheet. Expendable resources Expendable resource ratios strengthened relative to operations and debt levels across all rating categories. Endowment market returns bolstered expendable resource ratios, which also reflected reduced operating expenses and limited new-money debt issuance (see charts 9 and 10). We believe that financial resource ratios will remain relatively flat in fiscal 2015, given the likelihood of less-robust market returns and an increase in debt issuance in response to still-favorable interest rates. JULY 10,

18 Chart 9 JULY 10,

19 Chart 10 Cash and investments Cash and investments is typically a less conservative measure of balance-sheet strength, given that this measure comprises all cash and investments, including restricted endowment funds. Similarly to expendable resource ratios, cash and investments relative to operations and debt levels strengthened to varying degrees in almost all rating categories. We believe that strong investment returns as well as expense cuts resulted in the strengthening of cash and investments to debt compared to operations. The ratios relative to operations improved in 2014 over the previous year across the rating spectrum, with the exception of the speculative-grade category (see table 1). We believe that this is due partly to continued operating and liquidity pressures for the lowest-rated credits. Measuring The Debt Burden Standard & Poor's measures a university's debt burden primarily by comparing annual debt service with annual operating expenses. The average debt service burden remained relatively flat or declined in almost all rating categories. Given the still-low interest-rate environment, refunding debt issuance for economic savings continued across categories in fiscal 2014 and We also found that universities, particularly those in the higher rating categories, accelerated or expanded debt plans to take advantage of favorable borrowing costs in fiscal The JULY 10,

20 increased debt levels will not affect our median ratios until 2015 and are not captured in the current data. Another debt measure is the average age of a college or university's physical plant or facilities. We view deferred maintenance as a future liability, and changes in average age of plant reflect a potential need to invest more heavily in physical plant. We believe that tracking the age of campus infrastructure is a key ratio because campus facilities and attractiveness are important selling points in the highly competitive higher education market. As age of plant rises, we believe it is critical that colleges and universities make the necessary investments to update and renovate facilities with internal funds or external funds, such as debt or gifts. The average age of plant has remained steady across all categories since fiscal 2010; however, in fiscal 2014, the average plant age slightly increased for institutions in the 'A', 'BBB', and speculative-grade categories (see table 1). We believe this is a result of cuts in capital budgets to relieve strained operating margins. The nominal amount of debt outstanding remained relatively flat across our rated universe. Debt declined slightly in the 'AAA' and 'AA' categories and increased slightly in the 'A' and 'BBB' categories. Institutions need to finance building projects with debt regardless of enrollment growth to address continued competitive pressures at the midrange universities, which require updated facilities to attract students. Many universities put major capital projects on hold after the Great Recession but felt comfortable issuing new-money debt following a positive market performance in 2013 and again in Debt per FTE increased in most categories in fiscal 2014 (see chart 11). Chart 11 JULY 10,

21 Table 4 Ratings By State Rating Outlook Alabama Judson College BB+ Negative Arkansas Hendrix College A- Stable California Pomona College AAA Stable Stanford University AAA Stable Pepperdine University AA Stable University of Southern California AA Stable California Institute of Technology AA- Stable Loma Linda University A Stable Southern California College of Optometry BBB Stable California College of Arts And Crafts BBB- Positive Colorado Colorado College AA- Positive University of Denver (aka Colorado Seminary) A+ Stable Regis University BBB Stable Connecticut Yale University AAA Stable Wesleyan University AA Stable Trinity College A+ Stable Fairfield University A- Stable Quinnipiac University A- Stable Sacred Heart University BBB+ Stable University of Hartford BBB- Stable District of Columbia American University A+ Stable Gallaudet University A+ Stable George Washington University A+ Stable Catholic University of America A Stable Georgetown University A- Stable Howard University BBB+ Stable Florida Bethune-Cookman University A- Stable Stetson University A- Stable University of Miami A- Stable University of Tampa BBB+ Stable Florida Southern College BBB+ Stable JULY 10,

22 Table 4 Ratings By State (cont.) Barry University BBB Stable Nova Southeastern University BBB Stable Ave Maria University BBB- Stable Hodges University BBB- Stable Florida Institute of Technology BB+ Stable Georgia Emory University AA Stable Agnes Scott College AA- Stable Morehouse College A- Negative Hawaii Hawai'i Pacific University BB+ Negative Iowa Grinnell College AAA Stable Buena Vista University A Stable St. Ambrose University A- Stable University of Dubuque BBB- Stable Illinois Northwestern University AAA Stable University of Chicago AA Negative Bradley University A Stable DePaul University A Stable Loyola University of Chicago A Stable Illinois College A- Stable Illinois Wesleyan University A- Negative Midwestern University A- Stable Columbia College BBB+ Negative Lewis University BBB+ Stable Olivet Nazarene University BBB Stable Benedictine University BBB Negative Lake Forest College BBB- Stable Indiana Earlham College A Stable St. Mary's College A- Stable University of Indianapolis A- Stable Butler University BBB+ Positive Marian University BBB- Stable Kentucky Transylvania University A+ Negative Centre College of Kentucky A- Stable Lindsey Wilson College BBB- Negative JULY 10,

23 Table 4 Ratings By State (cont.) Louisiana Tulane University A Stable Loyola University of New Orleans A- Negative Massachusetts Harvard University AAA Stable Massachusetts Institute of Technology AAA Stable Amherst College AA+ Stable Smith College AA+ Stable Wellesley College AA+ Stable Williams College AA+ Stable Boston College AA- Stable Holy Cross College AA- Positive Mount Holyoke College AA- Stable Tufts University AA- Stable MCPHS University ( Massachusetts College of Pharmacy & Allied Health Sciences) AA- Stable Olin College of Engineering A+ Stable Worcester Polytechnic Institute A+ Stable Brandeis University A+ Stable Clark University A+ Stable Berklee College of Music A Stable Boston University A Positive Assumption College A- Stable Babson College A- Positive Lesley University A- Stable Emerson College BBB+ Negative Simmons College BBB+ Stable Springfield College BBB Stable Suffolk University BBB Stable Western New England University BBB Stable Wheelock College BBB Stable Lasell College BBB Stable Curry College BBB Stable Fisher College BBB- Stable Merrimack College BBB- Negative Maryland Johns Hopkins University AA Stable Loyola University in Maryland A Stable Goucher College A- Stable McDaniel College BBB+ Stable Notre Dame of Maryland University BBB+ Stable St John's College BBB+ Stable JULY 10,

24 Table 4 Ratings By State (cont.) Mount St. Mary's University BB+ Stable Maine Colby College AA Stable Bates College A+ Stable Michigan Hope College BBB+ Positive Thomas M Cooley Law School BB+ Negative Missouri Washington University AAA Negative Saint Louis University AA- Stable Ranken Technical College A- Positive A.T. Still University (KCOM) A- Stable St. Louis College of Pharmacy BBB+ Negative Rockhurst University BBB- Stable Southwest Baptist University BBB- Stable North Carolina Davidson College AA+ Stable Duke University AA+ Stable Wake Forest University AA Stable High Point University BBB+ Stable Meredith College BBB Stable Methodist University BBB Negative Nebraska Doane College A Stable Bellevue University A- Stable Nebraska Wesleyan University A- Stable New Hampshire Dartmouth College AA+ Stable Rivier University BBB Stable Southern New Hampshire University BBB Positive Franklin Pierce University CCC Negative New Jersey Princeton University AAA Stable Princeton Theological Seminary AAA Stable Seton Hall University A Stable Rider University BBB+ Negative Stevens Institute of Technology BBB+ Positive Georgian Court University BBB- Stable JULY 10,

25 Table 4 Ratings By State (cont.) Nevada Roseman University BB- Stable New York Columbia University AAA Stable Rockefeller University AA+ Stable Colgate University AA Stable Cornell University AA Stable The Juilliard School AA Stable Lebanese American University AA- Stable New York University AA- Stable Syracuse University AA- Stable University of Rochester AA- Stable Vassar College AA- Stable Teachers College at Columbia University A+ Stable Adelphi University A Stable Fordham University A Stable Hobart and William Smith Colleges (Colleges of the Seneca) A Stable Hofstra University A Stable Mercy College A Stable St. Lawrence University A Stable Rensselaer Polytechnic Institute A- Negative St. Francis College A- Stable St. John's University A- Stable The New School, A University A- Stable Mount Sinai School of Medicine A- Stable Nazareth College of Rochester BBB+ Stable Niagara University BBB+ Stable Saint John Fisher College BBB+ Stable New York Institute of Technology BBB+ Negative Iona College BBB Stable Long Island University BBB- Positive Molloy College BBB Stable Sarah Lawrence College BBB Stable Yeshiva University BBB Negative Albany College of Pharmacy BBB Stable Albany Law School BBB Negative Brooklyn Law School BBB Stable New York Chiropractic College BBB Positive New York Law School BBB Negative St. Bonaventure University BBB- Stable Hartwick College BBB- Stable JULY 10,

26 Table 4 Ratings By State (cont.) Medaille College BB+ Negative Pace University BB+ Stable Vaughn College of Aeronautics and Technology BB Stable Dowling College B- Negative Ohio Denison University AA Stable Oberlin College AA Stable Case Western Reserve University AA- Stable Kenyon College A+ Stable University of Dayton A Stable Baldwin-Wallace College A- Stable Xavier University A- Stable Marietta College BBB+ Stable Oregon Reed College AA- Stable Willamette University A Stable Lewis & Clark College A- Stable University of Portland BBB+ Positive Pacific University BBB Stable Concordia University BB+ Stable Pennsylvania Swarthmore College AAA Stable University of Pennsylvania AA+ Stable University of Pittsburgh AA+ Stable Bryn Mawr College AA Stable Haverford College AA Negative Carnegie Mellon University AA- Stable Franklin & Marshall College AA- Stable Lafayette College AA- Stable Lehigh University AA- Stable Dickinson College A+ Stable Muhlenberg College A+ Stable Philadelphia College of Osteopathic Medicine A+ Stable Villanova University A+ Stable Thomas Jefferson University A Stable Drexel University A Stable Gettysburg College A Stable Lycoming College A Stable Messiah College A Stable Pennsylvania College of Technology A Stable University of Scranton A Negative JULY 10,

27 Table 4 Ratings By State (cont.) Mount Aloysius College A Stable York College of Pennsylvania A Stable Allegheny College A- Stable Duquesne University A- Positive Juniata College A- Stable Moravian College A- Negative Saint Joseph's University A- Stable Ursinus College A- Stable Washington & Jefferson College A- Stable Elizabethtown College BBB+ Stable Widener University BBB+ Negative Arcadia University BBB Stable Chatham University BBB Negative Gannon University BBB Stable Gwynedd-Mercy College BBB Stable La Salle University BBB Stable Mercyhurst College BBB Negative Neumann University BBB Stable Philadelphia University BBB Stable Waynesburg University BBB Stable Wilkes University BBB Stable Carlow University BBB- Stable Eastern University BBB- Negative Saint Francis University BBB- Positive Cedar Crest College BB+ Stable Immaculata University BB+ Stable Marywood University BB+ Stable Puerto Rico Universidad Interamericana de Puerto Rico A- Stable University of the Sacred Heart BBB Negative Polytechnical University of Puerto Rico BBB- Stable Sistema Universitario Ana G Mendez BBB- Stable Rhode Island Brown University AA+ Stable Bryant University A Stable Providence College A Stable Johnson & Wales University A- Stable New England Institute of Technology A- Stable South Carolina Wofford College A- Stable JULY 10,

28 Table 4 Ratings By State (cont.) Tennessee Vanderbilt University AA Stable Rhodes College A+ Positive University of the South A+ Stable Belmont University BBB+ Stable Texas Rice University AAA Stable Trinity University AA Stable Southern Methodist University AA- Stable Baylor University A+ Stable Wayland Baptist University A- Stable Baylor College of Medicine A- Positive University of St. Thomas BBB+ Stable St. Edward's University BBB+ Stable Texas Lutheran University BBB Negative Lubbock Christian University BBB Negative Utah Westminster College BBB Stable Virginia University of Richmond AA+ Stable Liberty University AA Stable Washington & Lee University AA Stable Hampden-Sydney College A Stable Hampton University A- Stable Randolph College (fka Randolph-Macon Woman's College) A- Stable Roanoke College A- Stable Lynchburg College BBB Positive Regent University BBB Negative Marymount University BB+ Stable Sweet Briar College B- CWNeg Vermont Middlebury College AA Stable St. Michael's College A- Stable Washington University of Puget Sound A+ Stable Seattle University A Stable Pacific Lutheran University BBB Negative Wisconsin Medical College of Wisconsin A+ Positive Carroll University BBB+ Stable JULY 10,

29 Table 4 Ratings By State (cont.) West Virginia Bethany College BB+ Stable Table 5 Ratings On Private Colleges And Universities By Rating Category* State Rating Outlook AAA Columbia University NY AAA Stable Grinnell College IA AAA Stable Harvard University MA AAA Stable Massachusetts Institute of Technology MA AAA Stable Northwestern University IL AAA Stable Pomona College CA AAA Stable Princeton Theological Seminary NJ AAA Stable Princeton University NJ AAA Stable Rice University TX AAA Stable Stanford University CA AAA Stable Swarthmore College PA AAA Stable Washington University MO AAA Negative Yale University CT AAA Stable AA+ Amherst College MA AA+ Stable Brown University RI AA+ Stable Dartmouth College NH AA+ Stable Davidson College NC AA+ Stable Duke University NC AA+ Stable Rockefeller University NY AA+ Stable Smith College MA AA+ Stable University of Pennsylvania PA AA+ Stable University of Pittsburgh PA AA+ Stable University of Richmond VA AA+ Stable Wellesley College MA AA+ Stable Williams College MA AA+ Stable AA Bryn Mawr College PA AA Stable Colby College ME AA Stable Colgate University NY AA Stable Cornell University NY AA Stable Denison University OH AA Stable Emory University GA AA Stable Haverford College PA AA Negative JULY 10,

30 Table 5 Ratings On Private Colleges And Universities By Rating Category* (cont.) Johns Hopkins University MD AA Stable Liberty University VA AA Stable Middlebury College VT AA Stable Oberlin College OH AA Stable Pepperdine University CA AA Stable The Juilliard School NY AA Stable Trinity University TX AA Stable University of Chicago IL AA Negative University of Southern California CA AA Stable Vanderbilt University TN AA Stable Wake Forest University NC AA Stable Washington & Lee University VA AA Stable Wesleyan University CT AA Stable AA- Agnes Scott College GA AA- Stable Boston College MA AA- Stable California Institute of Technology CA AA- Stable Carnegie Mellon University PA AA- Stable Case Western Reserve University OH AA- Stable Colorado College CO AA- Positive Franklin & Marshall College PA AA- Stable Holy Cross College MA AA- Positive Lafayette College PA AA- Stable Lebanese American University NY AA- Stable Lehigh University PA AA- Stable MCPHS University (Massachusetts College of Pharmacy & Allied Health Sciences) MA AA- Stable Mount Holyoke College MA AA- Stable New York University NY AA- Stable Reed College OR AA- Stable Saint Louis University MO AA- Stable Southern Methodist University TX AA- Stable Syracuse University NY AA- Stable Tufts University MA AA- Stable University of Rochester NY AA- Stable Vassar College NY AA- Stable A+ American University DC A+ Stable Bates College ME A+ Stable Baylor University TX A+ Stable Brandeis University MA A+ Stable JULY 10,

31 Table 5 Ratings On Private Colleges And Universities By Rating Category* (cont.) Clark University MA A+ Stable Dickinson College PA A+ Stable Gallaudet University DC A+ Stable George Washington University DC A+ Stable Kenyon College OH A+ Stable Medical College of Wisconsin WI A+ Positive Muhlenberg College PA A+ Stable Olin College of Engineering MA A+ Stable Philadelphia College of Osteopathic Medicine PA A+ Stable Rhodes College TN A+ Positive Teachers College at Columbia University NY A+ Stable Transylvania University KY A+ Negative Trinity College CT A+ Stable University of Denver (aka Colorado Seminary) CO A+ Stable University of Puget Sound WA A+ Stable University of the South TN A+ Stable Villanova University PA A+ Stable Worcester Polytechnic Institute MA A+ Stable A Adelphi University NY A Stable Berklee College of Music MA A Stable Boston University MA A Positive Bradley University IL A Stable Bryant University RI A Stable Buena Vista University IA A Stable Catholic University of America DC A Stable DePaul University IL A Stable Doane College NE A Stable Drexel University PA A Stable Earlham College IN A Stable Fordham University NY A Stable Gettysburg College PA A Stable Hampden-Sydney College VA A Stable Hobart and William Smith Colleges (Colleges of the Seneca) NY A Stable Hofstra University NY A Stable Loma Linda University CA A Stable Loyola University in Maryland MD A Stable Loyola University of Chicago IL A Stable Lycoming College PA A Stable Mercy College NY A Stable Messiah College PA A Stable JULY 10,

32 Table 5 Ratings On Private Colleges And Universities By Rating Category* (cont.) Mount Aloysius College PA A Stable Pennsylvania College of Technology PA A Stable Providence College RI A Stable Seattle University WA A Stable Seton Hall University NJ A Stable St. Lawrence University NY A Stable Thomas Jefferson University PA A Stable Tulane University LA A Stable University of Dayton OH A Stable University of Scranton PA A Negative Willamette University OR A Stable York College of Pennsylvania PA A Stable A- A.T. Still University (KCOM) MO A- Stable Allegheny College PA A- Stable Assumption College MA A- Stable Babson College MA A- Positive Baldwin-Wallace College OH A- Stable Baylor College of Medicine TX A- Positive Bellevue University NE A- Stable Bethune-Cookman University FL A- Stable Centre College of Kentucky KY A- Stable Duquesne University PA A- Positive Fairfield University CT A- Stable Georgetown University DC A- Stable Goucher College MD A- Stable Hampton University VA A- Stable Hendrix College AR A- Stable Illinois College IL A- Stable Illinois Wesleyan University IL A- Negative Johnson & Wales University RI A- Stable Juniata College PA A- Stable Lesley University MA A- Stable Lewis & Clark College OR A- Stable Loyola University of New Orleans LA A- Negative Midwestern University IL A- Stable Moravian College PA A- Negative Morehouse College GA A- Negative Mount Sinai School of Medicine NY A- Stable Nebraska Wesleyan University NE A- Stable New England Institute of Technology RI A- Stable JULY 10,

33 Table 5 Ratings On Private Colleges And Universities By Rating Category* (cont.) Quinnipiac University CT A- Stable Randolph College (fka Randolph-Macon Woman's College) VA A- Stable Ranken Technical College MO A- Positive Rensselaer Polytechnic Institute NY A- Negative Roanoke College VA A- Stable Saint Joseph's University PA A- Stable St. Ambrose University IA A- Stable St. Francis College NY A- Stable St. John's University NY A- Stable St. Mary's College IN A- Stable St. Michael's College VT A- Stable Stetson University FL A- Stable The New School, A University NY A- Stable Universidad Interamericana de Puerto Rico PR A- Stable University of Indianapolis IN A- Stable University of Miami FL A- Stable Ursinus College PA A- Stable Washington & Jefferson College PA A- Stable Wayland Baptist University TX A- Stable Wofford College SC A- Stable Xavier University OH A- Stable BBB+ Belmont University TN BBB+ Stable Butler University IN BBB+ Positive Carroll University WI BBB+ Stable Columbia College IL BBB+ Negative Elizabethtown College PA BBB+ Stable Emerson College MA BBB+ Negative Florida Southern College FL BBB+ Stable High Point University NC BBB+ Stable Hope College MI BBB+ Positive Howard University DC BBB+ Stable Lewis University IL BBB+ Stable Marietta College OH BBB+ Stable McDaniel College MD BBB+ Stable Nazareth College of Rochester NY BBB+ Stable New York Institute of Technology NY BBB+ Negative Niagara University NY BBB+ Stable Notre Dame of Maryland University MD BBB+ Stable Rider University NJ BBB+ Negative Sacred Heart University CT BBB+ Stable JULY 10,

34 Table 5 Ratings On Private Colleges And Universities By Rating Category* (cont.) Saint John Fisher College NY BBB+ Stable Simmons College MA BBB+ Stable St John's College MD BBB+ Stable St. Edward's University TX BBB+ Stable St. Louis College of Pharmacy MO BBB+ Negative Stevens Institute of Technology NJ BBB+ Positive University of Portland OR BBB+ Positive University of St. Thomas TX BBB+ Stable University of Tampa FL BBB+ Stable Widener University PA BBB+ Negative BBB Albany College of Pharmacy NY BBB Stable Albany Law School NY BBB Negative Arcadia University PA BBB Stable Barry University FL BBB Stable Benedictine University IL BBB Negative Brooklyn Law School NY BBB Stable Chatham University PA BBB Negative Curry College MA BBB Stable Gannon University PA BBB Stable Gwynedd-Mercy College PA BBB Stable Iona College NY BBB Stable La Salle University PA BBB Stable Lasell College MA BBB Stable Lubbock Christian University TX BBB Negative Lynchburg College VA BBB Positive Mercyhurst College PA BBB Negative Meredith College NC BBB Stable Methodist University NC BBB Negative Molloy College NY BBB Stable Neumann University PA BBB Stable New York Chiropractic College NY BBB Positive New York Law School NY BBB Negative Nova Southeastern University FL BBB Stable Olivet Nazarene University IL BBB Stable Pacific Lutheran University WA BBB Negative Pacific University OR BBB Stable Philadelphia University PA BBB Stable Regent University VA BBB Negative Regis University CO BBB Stable Rivier University NH BBB Stable JULY 10,

35 Table 5 Ratings On Private Colleges And Universities By Rating Category* (cont.) Sarah Lawrence College NY BBB Stable Southern California College of Optometry CA BBB Stable Southern New Hampshire University NH BBB Positive Springfield College MA BBB Stable Suffolk University MA BBB Stable Texas Lutheran University TX BBB Negative University of the Sacred Heart PR BBB Negative Waynesburg University PA BBB Stable Western New England University MA BBB Stable Westminster College UT BBB Stable Wheelock College MA BBB Stable Wilkes University PA BBB Stable Yeshiva University NY BBB Negative BBB- Ave Maria University FL BBB- Stable California College of Arts And Crafts CA BBB- Positive Carlow University PA BBB- Stable Eastern University PA BBB- Negative Fisher College MA BBB- Stable Georgian Court University NJ BBB- Stable Hartwick College NY BBB- Stable Hodges University FL BBB- Stable Lake Forest College IL BBB- Stable Lindsey Wilson College KY BBB- Negative Long Island University NY BBB- Positive Marian University IN BBB- Stable Merrimack College MA BBB- Negative Polytechnical University of Puerto Rico PR BBB- Stable Rockhurst University MO BBB- Stable Saint Francis University PA BBB- Positive Sistema Universitario Ana G Mendez PR BBB- Stable Southwest Baptist University MO BBB- Stable St. Bonaventure University NY BBB- Stable University of Dubuque IA BBB- Stable University of Hartford CT BBB- Stable BB+ Bethany College WV BB+ Stable Cedar Crest College PA BB+ Stable Concordia University OR BB+ Stable Florida Institute of Technology FL BB+ Stable Hawai'i Pacific University HI BB+ Negative JULY 10,

36 Table 5 Ratings On Private Colleges And Universities By Rating Category* (cont.) Immaculata University PA BB+ Stable Judson College AL BB+ Negative Marymount University VA BB+ Stable Marywood University PA BB+ Stable Medaille College NY BB+ Negative Mount St. Mary's University MD BB+ Stable Pace University NY BB+ Stable Thomas M Cooley Law School MI BB+ Negative BB Vaughn College of Aeronautics and Technology NY BB Stable BB- Roseman University NV BB- Stable B- Dowling College NY B- Negative Sweet Briar College VA B- Watch Neg CCC Franklin Pierce University NH CCC Negative *As of May 15, Table 6 Glossary Of Ratios And Terms Ratio Demand ratios FTE enrollment Percent undergraduate (%) Freshman acceptance rate (%) Freshman matriculation rate (%) Average SAT scores Revenue diversity Student Dependence (%) Grants & contracts (%) Gifts & pledges (%) Investment & endowment income (%) Financial aid and expense ratios Financial aid burden (%) Tuition discount (%) Instruction (%) Debt ratios Total outstanding debt MADS Burden Definition Total students enrolled on a full-time equivalent basis Total number of undergraduate students/total students Number of freshman accepted/total number of freshman applications Number of freshman enrolling/number of freshman accepted Combined average SAT scores for entering freshman Gross tuition and fees and auxiliary system operating revenues/total unrestricted operating revenues Government grants & contracts/total unrestricted operating revenues Annual fund gifts & pledges/total unrestricted operating revenues Endowment spending policy income & investment income/total unrestricted operating revenues Total financial aid costs/total operating expenses Total financial aid costs/gross tuition and fees Instructional costs/ total operating expenses Par amount of all outstanding debt ($000s) Maximum Annual Debt Service/total operating expenses JULY 10,