[January 06, 2014]

Fitch: Rating System Could Change Funding for US Higher Ed

If the proposed Postsecondary Institution Ratings System (PIRS) becomes linked to federal financial aid packages, support for some colleges could rise and others could fall depending upon how institutions operate in a more metric-driven environment, Fitch Ratings says.

Fitch's 2014 Outlook for the Higher Education Sector noted that PIRS would likely incorporate graduation and job placement rates as a measure of an individual institution's success and effectiveness. PIRS will also measure access and affordability of colleges and universities to ascertain the relative value of an institution. Should a college or university prove unable to achieve acceptable benchmarks within PIRS, financial aid allocations could decline which could weaken demand and consequently, retention and graduation rates.

Last week the U.S. Department of Education issued a request for information on PIRS's metrics, data collection, weighting and scoring, and presentation frameworks. The notice reiterated President Obama's intent to propose allocating financial aid based on this evaluation technique by 2018. The system is slated to be put into place by the 2015-2016 academic year.

Over the shorter run, we believe this request for information could add further descriptive ad measurable factors to PIRS and Fitch will continue to monitor the development of this ratings system.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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