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April 03, 2024

FY 2023 Higher Education Sector Report Summary

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At the Board of Directors Meeting held on March 19th, Ms. Johnson, Compliance Specialist, presented a review of CHEFA’s Higher Education Sector report, which includes financial operating results for FY 2023 and market demand results for FY 2024.

This sector report reviews the performance of the ten private institutions that comprise CHEFA’s higher education portfolio, consisting of 61 bond series with $4.92 billion outstanding.

Demand: Most of the ten private Connecticut based institutions that make up CHEFA’s higher education portfolio have experienced increased market demand in FY 2024 across four key indicators: applications, selectivity, matriculation, and enrollment. Application volume remains very strong, at it’s highest level in FY 2024, up 20% from FY 2020, resulting in an improved selectivity rate during this time. Total FTE enrollment is at its highest level in the past five years despite slightly lower matriculation yield medians.

Key Financial Ratios: FY 2023 financial results reflect a stable view of the sector despite weaker operating performance as expenses outpaced revenues. The net tuition revenue median declined from the prior year. The portfolio remains heavily reliant on tuition and auxiliary revenue, with the median accounting for approximately 79% of total revenue. The EBIDA margin median decreased from 17.1% in FY 2022 to 15.2% in FY 2023 but has increased from 13.7% from five years ago. The portfolio is still considered leveraged but remains manageable across the sector with a lower debt service burden median and a strong debt service coverage ratio median at 3.1 times.

Total cash and investments declined 1.0% from the prior year but is 43% higher than it was five years ago. The cushion for debt median remained relatively flat over the past five years, averaging just under 2.0 times. The total cash and investments to operations median also remained flat from the prior year but is approximately 16% higher from five years ago. Five institutions had at least a favorable 2.0 times coverage in FY 2023 while one institution had less than a one-year’s cushion for operations. The FY23 monthly days cash on hand median of 365 days declined for a second consecutive year from its high of 456 days in FY 2021 but remains 4.3% higher than from five years ago. FY 2023 individual medians of the private institutions varied significantly from a low of 50 days to a high of 815 days.

Total capital investment for the portfolio, increased 17% over the past five years with 100% of the portfolio investing more in their plant than their annual depreciation expense in FY 2023 compared to only 60% from five years ago. The FY23 median capital spending ratio of 2.1 times in FY 2023 increased from 1.5 times over the past five years and is at its highest level.

Credit Outlook: All but one of the private institutions have a credit rating with one or more of the rating agencies. Moody’s overall outlook of the higher education sector for the next 12-18 months predicts a stable environment where expense and revenue growth will move closer to equilibrium. Expense growth will moderate as inflation cools, preventing further deterioration in operating performance for most of the sector. Financial reserves will remain sound as stronger investment returns and growing gift revenue help to mitigate budget gaps. Leverage will decline as high interest rates dampen borrowing, but future capital needs will require addressing.

To learn more about CHEFA’s Higher Education Sector report for FY 2023 and the performance of its ten private institutions that make up our higher education portfolio, please contact Michael Morris, Managing Director, at