Looking for Extra Credit, Schools Get Downgraded

The credit crunch is starting to hit even top-tier universities, the Wall Street Journal reports. Both Moody’s and S&P stripped Dartmouth of its AAA rating this week. It’s the 20th college Moody’s has downgraded this year. “That’s comparable to the rate of downgrades universities saw during the dot-com bust,” said Moody’s managing director. “And we probably will surpass it.”

The downgrades will increase the price of credit, even as many schools are being pressured to borrow more. Endowments were so damaged by the market crash that even Ivy League schools are borrowing to fund day-to-day operations. In fact, Moody's says schools with the biggest endowment pools are the most strapped for cash; these schools draw a much bigger portion of their operating revenue from the shrinking endowments than more typical colleges, the Journal notes.
(More Moody's stories.)