Weekly Market Update


Thursday, July 27, 2017

A study released by American Council of Trustees and Alumni (ACTA) found that large, public research universities spend proportionally less on administrative costs than small, private institutions. For every dollar spent on instructional staff, small institutions spent almost four times as much on administrative staff as their larger peers. However, many criticized the analysis for lacking context and ignoring important variations among different types of institutions. ACTA leaders responded that they were very conservative in calculating the ratio between administrative spending and instructional costs, and the study only sought to enable an institution to understand its performance within its own sector. The study also made several recommendations to trustees, including greater awareness of administrative spending and the creation of standardized rules to govern major expenditures.

In Other News

  • LIBOR will be discontinued in 2021 in recognition that a benchmark based on few data points provides a poor basis for pricing trillions of dollars of securities. Finding a replacement is not easy. Candidates include the Sterling Overnight Index, Sonia, a Treasuries repo rate, and TOIS.
  • In an attempt to determine if tuition increases are driven by state funding cuts or increased labor costs and spending, a recent study found that students have paid an extra $257 for every $1,000 cut from state and local appropriations.
  • Federal grants and loans will be postponed for West Virginia public universities and colleges due to late filings of federal financial aid audits. In addition, reimbursement will be under strict cash monitoring. Regardless, administrators claim that students will still receive their financial aid on time.
  • Recently, college tuition has been growing at a rate lower than its multi-decade average, mainly due to decreased demand and increased state funding of public institutions.
  • A Chronicle study revealed that many big nonprofits were collecting more money than they spent, growing their endowments. While the organizations claim that larger endowments protect them from financial downturns, critics argued that the money should be spent currently to help those in need.
  • About 10% of borrowers are severely behind on their student loans, partially due to the DOE and its servicers, such as Navient, failing to enroll them into affordable repayment programs for which they are eligible. The DOE is withholding some of these borrowers' tax refunds and even their co-signers' Social Security payments.

Rating Agency Update

  • Moody's assigned A1 to University of Northern Iowa's Series 2017 Refunding Bonds. The outlook is stable.
  • Moody's assigned Baa2 to Gannon University's Series 2017 Higher Educational Facilities Revenue Bonds. The outlook is stable.
  • Moody's downgraded University of Connecticut to Aa3 from Aa2. The outlook is negative.
  • S&P upgraded Southern Illinois University's rating to BB+ from BB. The outlook is stable.
  • S&P upgraded Governors State University's rating to BB+ from BB. The outlook is stable.
  • S&P upgraded Northeastern Illinois University's rating to B+ from B. The outlook is stable.
  • S&P upgraded Eastern Illinois University's rating to B+ from B. The outlook is stable.