GW unfazed by wider tuition trends

Nearly one-fifth of private universities fear a decrease in net tuition revenue as students opt to attend lower-cost public colleges, a report released by a top financial rating agency found this month.

But Executive Vice President and Treasurer Lou Katz said GW is not anticipating a drop in net tuition revenue – which counts tuition fees minus internally funded scholarships – because the University’s reputation – and revenue from tutition – remains steady.

“We continue to show strong demand characteristics with a record-breaking number of applicants and high selectivity,” Katz said.

Though the admissions office has not yet released this year’s final applicant total, 37 percent of early decision applicants were accepted.

As both public and private universities continue to struggle with the financial implications of the recession, the Moody’s Investors Services study found that 18 percent of private universities expect tuition revenue to shrink during fiscal year 2012. Thirteen percent of private universities saw actual declines in 2011.

“The survey highlights the growing importance of perceived value and market reputation of universities as students and families struggle with flat income and stagnant net worth,” the report reads.

Net tuition revenue is GW’s largest source of income, topping $538 million in the 2011 fiscal year and accounting for more than 60 percent of all revenue, which covers staff and faculty salaries and benefits, student scholarships, supplies, equipment and other expenses.

Last year, net tuition increased more than $31 million, the largest chunk of an overall $35 million revenue bump. At the same time, expenses increased $34 million – more than half of which was dedicated to staff salaries, wages and benefits.

The University has buffered the budget impact of large building projects, including the Science and Engineering Hall, by taking out loans in advance when interest rates are most favorable, Katz said.

GW’s debt stabilized last year at $1.1 billion, a figure Katz said he is comfortable with.

Maintaining tuition revenue is a top priority at many colleges, which are bracing for an overall slowdown in government support and private gifts, the Moody’s report found.

The third annual tuition pricing survey reflects a review of 152 private universities across the country. While GW did not participate, neighboring Georgetown and American Universities responded. Individual responses were not detailed in the report.

Moody’s preserved GW’s stable A1 investment rating, which is on par with market basket schools, when it last evaluated the University’s financial standing in August.

A1 is the firm’s upper-medium score, indicating that an institution is suitable for investment.

The ratings firm projected that nearly a quarter of private universities rated at A1 or below will decrease their tuition price per student in fiscal year 2012 to compete with public universities’ lower tuition costs.

The Board of Trustees sets tuition for the next fiscal year at its annual February meeting. For each of the last four years, GW’s tuition has inched up 3 percent, which totaled a $1,243 increase last year.

Katz, who is responsible for recommending tuition increases to the board, declined to comment on anticipated pricing information until after next month’s meeting.

Moody’s associate analyst Paul Corcoran speculated that more selective universities would continue to see rising tuition revenue.

Corcoran declined to comment on GW specifically, but said private institutions that attract government research grants will remain financially strong.

Another Moody’s report, published Jan. 23 predicted that universities that depend on tuition “will continue to face challenges in the next 12 to 18th months.”

The allure of lower-cost alternative to all but the most elite universities will drive an overall slowdown in net tutition growth in coming years, analysts said in the report, published in The Chronicle of Higher Education.

Increasing research at the University has been a priority in recent years, shifting GW’s focus and resources toward science and engineering programs.

“Schools with tougher acceptance rates will be able to retain the pricing power and be able to keep their enrollment high,” Corcoran said. “However, schools that might struggle going forward are universities without high matriculation rates, not prominent market leaders. You’ll probably see students looking for lower cost alternatives.”

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