The coronavirus pandemic continues to have sweeping impacts on higher education as pressure on tuition and auxiliary revenues are compounded by reduced state funding. However, there is a justified or renewed sense of optimism for the year ahead as promising treatment and vaccine news coupled with the potential for another round of federal stimulus offers hope of better days to come.
Despite S&P, Moody’s and Fitch Rating’s negative outlook on the Higher Education sector in 2021, all three rating agencies recently acknowledged that a return to ‘more normal’ operations with students back on campus combined with federal policy and economic stimulus that supports sector growth could lead to a change in rating outlook.
The Biden Administration has outlined several proposals which would have broad credit implications for the Higher Education sector if enacted. Of the key proposals, the first to hit the docket will be the Biden Administration’s $1.9 trillion federal relief bill, which would provide $170 billion for education and $350 billion for state and local government. Though the exact amount earmarked for Higher Education is still to be determined, it is expected to far exceed the $14 billion provided by the CARES Act in March 2020 and the $23 billion provided by the Consolidated Appropriations Act in December 2020.
The Biden Administration is also focused on increasing the affordability and accessibility of Higher Education, and has outlined several additional proposals which could be credit-positive for the sector. These proposals include increasing the amount and expanding eligibility for the Pell Grant as well as tuition-free community colleges and tuition-free public universities for families earning under $125,000.
Resiliency has long been a characteristic of the Higher Education sector. 2020 has tested all of us and it is Capstone’s hope and expectation that positive news and developments in 2021 and beyond will serve to strengthen the sector and improve access to higher education. A return to normalcy will not be overnight nor equally experienced by all, however light at the end of the tunnel is beginning to flicker in the distance and we look forward to working alongside our university and college partners to proactively develop solutions to the respective challenges and needs resulting from the unique situation we are collectively working our way out of.