Student Selectivity and Higher Education Institutions Credit Ratings

Abstract

This paper investigates the relation between the creditworthiness of U.S. institutions of higher education and their student selectivity (i.e., demand and quality). We study whether the impact of student selectivity differs across public versus private universities; across the credit quality of the given public university’s state; and across the level of state appropriations for the given public university. We find that student quality and demand measures are significantly associated with their corresponding institution’s creditworthiness, especially for private universities. For public universities the association is weak and, contrary to our expectations, does not depend on the state credit quality or level of state funding. Our findings are robust to the inclusion of control variables.

Keywords: credit ratings, student selectivity, higher education

JEL Classification: G11, I23, L31