Moody’s: Urban Private Colleges Claim a Larger Slice of the Enrollment, Revenue Pie
Posted By Donna Fuscaldo on July 28, 2016 at 9:16 am
Urban private colleges have something over their rural and suburban counterparts: more enrollment and revenue. That’s according to a recent report from Moody’s, which found enrollment at private schools in cities grew 34 percent from 2000 to 2015.
Private universities enrollment as a whole rose 24 percent in the same time period. These urban schools are also making more money, with private urban schools raking in $343 million on average in fiscal 2015, dwarfing the $131 million non-urban schools earned.
“Access to the amenities of a city—like restaurants, theaters, museums, public transportation, and a broader social network—is something people are willing to pay for,” says Preston Cooper, policy analyst at The Manhattan Institute for Policy Research. “There are also more job opportunities in cities. So it makes sense that urban schools would see higher enrollment and higher revenue if their privileged urban position enables them to charge more in tuition.”
It’s also reflective of a decades-long shift in demographics, with people flocking from suburbia, favoring urban living and all the conveniences that come with it. That in turn increases demand for colleges and universities in and around cities, including both private and public schools. The U.S. Census Bureau revealed last year that as of 2013, 62.7 percent of the U.S. population is living in a city, with the highest percentages in the West and Midwest. “People moving to the cities just cements certain advantages: job opportunities, social networks, city life,” says Cooper.
Urban private colleges provide lots of community service, internship opportunities
In addition to benefiting from good locations, Moody’s found urban private colleges are doing a better job of diversifying the student body, counting more out of state and international students as part of their student population. They are also resonating with the younger generations who want more out of their college experience than an education. They want to give back, and urban schools are often surrounded by a lot of neighborhoods that would welcome the help. Cities are also packed with businesses, community outreach services and internship opportunities, all of which are appealing to today’s crop of undergraduates.
“Urban-based universities and colleges have an incredible advantage in that they have a robust community they can draw from which opens up the door for a multitude of experiences you wouldn’t get in a rural-based institution,” says Bobbie Laur, executive director for the Coalition of Urban & Metropolitan Universities. “Employers want hands on skills, they want students that haven’t just learned in the classroom, and urban-based institutions provide bigger and more diverse opportunities.”
Revenue at urban private schools trumps their peers not only because they have more students. They also have real estate that they can make money off of. According to the Moody’s report urban private universities are benefiting from monetizing assets, giving them stronger capital flexibility. “Moody’s-rated private urban universities account for only 23% of our portfolio, but the book value of their net property, plant, and equipment assets represent nearly half the value of the entire private university portfolio,” says Michael Osborn, an analyst in Moody’s public finance group and author of the report. “From selling air rights to whole properties, numerous urban private universities have significantly benefited from monetizing real estate assets.”
It’s not all smooth sailing for private urban schools. While they are appealing to many they also are often associated with expensive rents and higher costs of living, which could temper demand or worse shut out students who can’t afford the tuition plus the higher living expenses. It’s a knock private colleges have long heard and one that Laur says they are working to dispel. “Private institutions tend to be forward thinking with scholarships, outreach and working on pathways for people to attend their campuses,” says Laur. “Especially for the local community” that often includes locals who are the first generation to go to college.
Suburban schools have to copy the urban ones
Suburban and rural private schools trying to increase their enrollment have to take a page from their urban counterparts, replicating what students like about urban private colleges on their campuses and dorms, Preston says. If job opportunities are luring the students away, he says, then rural and suburban schools should get more recruiters on campus. If it’s better internships, those schools have to make an effort to increase the diversity and training.
Another way to compete: offering more online courses and embracing technology as a way to educate the students. “There are certain things that non-urban campuses just can’t replicate, and that may be a challenge that those colleges will just have to live with,” he says.