Weekly Market Update


Thursday, July 13, 2017

In the past six months, the Department of Education has delayed or removed many rules set by the Obama administration that involve federal student aid, including the "borrower defense to repayment" rule, which aimed to forgive federal loans for students who accumulate debt due to illegal or deceptive college recruiting tactics. While some colleges endorse the decisions, 18 states are suing the Secretary of Education, Betsy DeVos, for backing away from the government's duty to protect student borrowers. More postponements or modifications are expected as the department scrutinizes over 150 rules and thousands of pieces of policy guidance. Most of the changes to date point to a reduced federal role in student aid, but the final goal of the department remains unclear.

In Other News

  • A bill may expand Pell Grant eligibility to short-term education programs, indicating increased support for career-oriented training. While many colleges and low-income students support the act, some experts worry about funding and quality control.
  • Last week, the State of Illinois passed the first budget for colleges in more than two years, ending a standoff that deprived Illinois colleges of funding for almost ten months. While the bill is welcome news for the state's schools, the budget crisis has already wrought widespread damage. Many institutions were forced to cut staff and programs, and some even faced rumors of closure.
  • Two recent reports described potential problems in the US higher education system, including the increasingly disproportionate concentration of assets in the 20 wealthiest private universities, the poor financial performance of small colleges, and the increasing percentage of out-of-state students in public universities.
  • The signature of Bethune-Cookman University's president on a $306 million dorm contract was forged, yet the board of trustees intends to continue the project despite the university's poor financial performance and difficulties in managing debt.
  • A recent Fed survey of consumers' expectations shows they expect inflation to fall in the short-term, but rise in the long-term. At the same time, compared to the results of the same survey a month ago, they are increasingly uncertain about the future of inflation, and, over the next year, have higher expectations of earnings and median home price increases.
  • Testifying on Wednesday, Janet Yellen indicated that the federal funds rate will continue to rise, although it will soon reach the neutral rate. In response, U.S. 2-year to 10-year treasury yields fell to their lowest points in weeks.

Rating Agency Update

  • Moody's assigned Aa1 to Princeton Theological Seminary's Series 2017A Taxable Refunding Revenue Bonds. The outlook is stable.
  • Moody's assigned A1 to Georgia Southern University's Series 2017 Refunding Revenue Bonds. The outlook is stable.
  • Moody's assigned Aa3 to Auburn University's Series 2017 Lease Bonds. The outlook is stable.
  • Moody's downgraded Hartwick College's long-term bond rating to Ba1 from Baa3. The outlook is negative.
  • Moody's downgraded the Catholic University of America's rating to A3 from A2. The outlook is stable.
  • Moody's affirmed Mercer University's Baa2 rating. The outlook was revised to positive from stable.