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Howard University finances: Moody's Investors Service review

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(AP/ABC7) - Moody's Investors Service is reviewing Howard University for a possible downgrade of its credit rating as the historically black college faces financial challenges.

The Washington Post reports Moody's has assigned an A3 rating to Howard since 2011 for about $290 million in bonds as the school was planning campus upgrades. That rating indicates a low risk the university would default on its debt. The next lower rating would indicate a moderate risk.

Moody's said in a statement Monday that the review "reflects Howard University's extremely pressured environment." The agency cited an enrollment decline, cuts in federal funding and a drop in the university's hospital business. Howard faces a $25 million reduction due to Congress' automatic budget cuts.

In January, Moody's expressed a negative outlook for the higher education sector, though University officials said there is still a strong demand for a Howard education.

"Like most universities today, Howard University faces revenue challenges," university spokeswoman Kerry-Ann Hamilton said. "But we remain engaged in a proactive and aggressive multi-pronged and multi-year effort to address those pressures, which has resulted in four consecutive years of positive operating results and an endowment that is above pre-recession levels."

Daryll Love is a sophomore at Howard. “I mean as a whole I think Howard will be okay but it will be different measures and taking different risks and doing what they have to do basically,” he said.

And plenty of other students are confident in the school’s follow-through.

"I definitely have like a lot of confidence in the Board of Trustees and I am sure they are going to do great things with Howard University in the future,” said Howard junior David Bullock.

However, students like Bullock will have to temper their optimism as Moody’s also cited in its release that “an upgrade or a return to A3 with a stable outlook is unlikely.”

“I am hoping the fact that it made the news becomes a wake-up call,” said Alice Thomas, a PhD student at Howard.

Howard's college deans have objected to the school's financial management. In a letter disclosed July 1, the deans wrote that "fiscal mismanagement is doing irreparable harm" to the school.

University President Sidney Ribeau said he "unequivocally" rejects that allegation. After meeting with Ribeau, the deans pledged to help the university address its financial challenges.

Last fall's enrollment totaled 10,001 students, down 5 percent from the year before. Officials said tighter eligibility standards for federal loans and grants and rising tuition may have been factors in the enrollment drop.

Howard's credit rating is the seventh highest on a 21-level Moody's scale. Of the 282 private colleges and universities rated by Moody's, 185 have a rating in the A range.

In Washington, George Washington University has the highest rating with an A1. Catholic University, American University and Gallaudet University all have A2 ratings. And Georgetown University, like Howard, has an A3 rating.

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