Moody's Investors Service on Tuesday gave the U.S. higher education sector a negative outlook for next year, predicting that aggregate annual operating revenue growth will come in at 3.5 percent while expenses increase by 4 percent.
In response, 15 percent of colleges and universities will be forced to cut costs, Moody's said.
"Higher education is also vulnerable to looming changes in federal policy or funding," Moody's said.
"Tax reform could negatively affect philanthropy and endowments," the ratings agency said. "Eliminating private activity bonds, which private colleges have used to facilitate tax-exempt borrowing, would increase borrowing costs for these universities. Any tax changes to tuition support for graduate students could also negatively impact graduate enrollment and research levels."
In the Philadelphia region and in the rest of the Northeastern U.S., as well as in the Midwest, institutions face the greatest risk because the number of high school graduates are expected to drop 5 percent between 2009 and 2025, Moody's said.