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The Problem of Institutional Debt

Much attention has been given—and rightfully so—to the student debt crisis in the United States. Collectively, outstanding student loan balances have ballooned to a record $1.7 trillion. And as student debt has grown, so has institutional debt, with colleges and universities increasing their debt load to fund ambitious projects and cover expenses.

In fiscal year 2018–19, 70 percent of public and private nonprofit colleges and universities in the United States held interest-bearing debt, amounting to more than $336 billion.

This year’s Annual Report on the Economic Status of the Profession examines the explosion of institutional debt, which might limit an institutions’ options for dealing with financial adversity, from 2008–09 to 2018–19.

Over $336 billion in long-term debt was reported by US colleges and universities in fiscal year 2018–19, a growth of 71.1 percent since fiscal year 2008–09. Long-term debt grew 50.2 percent among public institutions and 116.0 percent among private institutions.

State support is a key financial indicator for public institutions, although the majority of funding for public higher education in half of the states now comes from student tuition and fees, according to a 2018 study by the State Higher Education Executive Officers Association. For 2020– 21, state support per FTE student remained roughly the same as in 2019–20, due in part to nearly $2 billion in federal COVID-19 relief funding. But following the cuts and slow recovery from the Great Recession of the late 2000s, more cuts are looming large because state revenues are projected to fall by as much as $200 billion by the end of the 2020–21 fiscal year, according to projections by the Urban Institute.

Debt is now woven into the fabric of higher education—both institutional debt and student debt. But for an institution with a poor outlook for growth, debt can become a burden and might limit its ability to deal with adversity.

The AAUP’s New Deal for Higher Education campaign has been focusing on the issue of institutional debt and other issues covered in the report, including contingency. You can find a webinar called “Rebudgeting the University” that discusses the issue of institutional debt here, with other webinars from the series.

The full annual report can be found here.

The AAUP Research Department

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Institutional Debt Graphic

Author: RonnieHays

Musical refugee, reluctant tech wrangler, 5th estate evangelist, father, brother, son, uncle, student, cousin, mentor, cosmic - earthbound - binaural - jokerman.

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