New Constructruction Projects Have Colleges Borrowing Billions

  November 20, 2017

By Ryan Berlin

Colleges and universities are under growing pressure to have the latest and greatest technology as well as have a sustainable and beautiful campus in order to attract potential students.

Colleges and universities collectively owe $240 billion, the Moody’s bond-rating service reports. That debt rose 18 percent, to $145 billion, in the last five years at public universities, Moody’s says. At privates, it went up 3 percent, to $95 billion, according to an article in The Atlantic.

Last year alone, colleges and universities borrowed a record $41.3 billion through municipal bonds, their principal source of debt funding, the financial information firm Thomson Reuters reports. That’s up from $28.7 billion a decade ago.

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One reason for this borrowing is that money is comparatively cheap while interest rates remain low.

But much of it is happening because—despite budget cuts at public universities, sluggish endowment growth at private ones, and falling enrollments everywhere—colleges and universities have continued to build new facilities at record-setting rates.

Colleges and universities collectively spent $8.4 billion on new construction and renovations from January through August of this year, up nearly 10 percent over the same period the year before, according to Dodge Data & Analytics, a private company that tracks this. That’s after laying out about $12 billion in each of the last three years.

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But the idea that these expenditures will pay for themselves by attracting new students may be wishful thinking, observers caution.

“Sometimes that doesn’t pan out—the ‘if you build it, they will come’ approach,” said Susan Menditto, the director of accounting policy at the National Association of College and University Business Officers.

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This Quick Read was submitted by Ryan Berlin, managing editor of Facility Maintenance Decisions, ryan.berlin@tradepressmedia.coma.


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