Colleges Lose Pricing Power

The demand for four-year college degrees is softening, the result of a perfect storm of economic and demographic forces that is sapping pricing power at a growing number of U.S. colleges and universities, according to a new survey by Moody's Investors Service.

Facing stagnant family income, shaky job prospects for graduates and a smaller pool of high-school graduates, more schools are reining in tuition increases and giving out larger scholarships to attract students, Moody's concluded in a report set to be released Thursday.

But the strategy is eating into net tuition revenue, which is the revenue that colleges collect from tuition minus scholarships and other aid. College officials said they need to increase net tuition revenue to keep up with rising expenses that include faculty benefits and salaries. But one-third of the 292 schools that responded to Moody's survey anticipate that net revenue will climb in the current fiscal year by less than inflation.

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