FY 2024 Higher Education Sector Report Summary

At the Board of Directors Meeting held on April 22nd, Krista Johnson, Senior Credit and Compliance Specialist, presented a review of CHEFA’s Higher Education Sector report, which included financial operating results for FY 2024 and market demand results for FY 2025. The sector report reviewed the performance of the eleven private institutions that comprise CHEFA’s higher education portfolio, consisting of 63 bond series with $4.90 billion outstanding.

Demand: Most of the eleven private Connecticut based institutions that make up CHEFA’s higher education portfolio have experienced increased market demand in FY 2025. Application volume remains very strong, is at its highest level in FY 2025, up 40% from FY 2021, resulting in an improved selectivity rate during this time. Total FTE enrollment has steadily increased in each of the past five years despite slightly lower matriculation yield medians.

Key Financial Ratios: FY 2024 financial results reflect a stable view of the sector supported by favorable operating and cash flow margins and solid balance sheet metrics. The EBIDA margin median increased from 12.7% in FY 2023 to 16.2% in FY 2024 and is at its second highest level over the past five years. The portfolio remains heavily reliant on tuition and auxiliary revenue, with the median accounting for approximately 79% of total revenue. The net tuition revenue median increased 3.4% from the prior year but is somewhat offset with a steady climb in the tuition discount median, from 38.0% in FY 2020 to 44.5% in FY 2024. 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 3.2 times.

Total cash and investments increased 27% from five years ago and is at its second highest level, but the total cash and investments to operations median of 1.8 times in FY 2024 is at its lowest level over the past five years. The cushion for debt median remained relatively flat over the past five years, averaging 1.9 times. The cushion for debt ranged from 1.2 times to 9.8 times and five institutions had at least a favorable 2.0 times coverage in FY 2024. The FY 2024 monthly days cash on hand median of 311 days declined for a third consecutive year from its high of 432 days in FY 2021. FY 2024 individual medians of the private institutions varied significantly from a low of 78 days to a high of 772 days.

Total capital investment for the portfolio, increased 40.1% over the past five years with 91% of the portfolio investing more in their plant than their annual depreciation expense in FY 2024 compared to only 73% from five years ago. However, the FY 2024 median capital spending ratio of 2.0 times decreased from 2.4 times in FY 2020.

Federal Policy Updates: As the new administration sought policy change, several potential threats loomed over the higher ed sector, warranting Moody’s to revise its sector outlook from stable to negative. Potential threats include federal funding cuts through NIH funding caps and the failure to comply with DEI directives, loss of tax-exempt status, increased endowment tax, international student visa revocations and tariff assessments. While some of these changes have already come to fruition, we will have to wait for the Senate to pass the budget bill and for trade negotiations to resume to fully understand what the impacts will be to the sector.

To learn more about CHEFA’s Higher Education Sector report for FY 2024 and the performance of its eleven private institutions that make up our higher education portfolio, please contact Krista Johnson, Senior Credit and Compliance Specialist at kjohnson@chefa.com.