(Bloomberg) -- Colleges and universities still have a horde of infrastructure needs despite selling billions worth of debt this year for new projects.
Moody’s Ratings estimates schools need $750 billion to $950 billion over the next decade to “make significant headway toward reducing deferred maintenance, upgrading facilities and building the new projects that are critical to strategic positioning,” according to a new report by the company.
Already, colleges have been on a borrowing spree in 2024 for dorms, athletic facilities, and other campus projects. Sales have jumped 97% to nearly $22 billion, according to data compiled by Bloomberg. That’s still a fraction of the estimate that Moody’s has laid out for the colleges it grades.
Growing financial strains may limit school’s ability to spruce up — roughly a third of universities rated by Moody’s face rising credit challenges. But if colleges don’t update their facilities, they risk losing their competitive edge to lure students and folding to the same pressures that have forced dozens to shutter.
“We expect the gap in capital spending rates between the sector’s strongest and weakest performers to widen further as credit strength continues to diverge,” the Moody’s analysts including Christopher Collins and Emily Raimes wrote.
Prestigious private school Williams College sold about $105 million of bonds for a new art museum and recreation center, among other projects. Colby College, located in Maine, sold bonds to fund a new residence hall this summer. It recently completed four other housing complexes. The Maryland Institute College of Art is also sprucing up its campus with the proceeds from a bond sale in July.
Related: Colleges Ramp Up Debt Sales in Frenzied Race for New Students
The projects reflect growing competition to lure high school seniors from a shrinking pool. The number of US high school graduates is projected to drop to 3.5 million in the 2036-37 year, a 10% decline compared to the level expected in 2024-25, according to the Western Interstate Commission for Higher Education.
Abigail Urtz, head of product strategies and economics at FHN Financial, said the increase in bond sales this year was reflective of that competition.
“Even the Ivys and the big public schools — everyone is having to take on more debt to compete for these students,” she said. “There’s been underinvestment in capital projects through the pandemic period, so there’s a lot of this catch-up issuance happening,” she said.
--With assistance from Sri Taylor.
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