The Importance and Risks of Institutional Borrowing
New Report with TIAA Institute
While student loan debt has ballooned to over $1.7 trillion, institutional debt, or money colleges and universities borrow as organizations, is frequently overlooked as a significant factor in higher education finance.
With support from the TIAA Institute, Ithaka S+R examined institutional borrowing practices. Specifically, we examined how periods of crisis and financial strain impact the decision to borrow. In the newly released study, we identified institutional characteristics linked to growth in debt levels during the 2008 Great Recession and tracked how institutional behaviors changed over time after large increases in borrowing. We examined how these borrowing patterns and the implications of borrowing vary across institutional characteristics. The study focused on understanding the borrowing process and how the Great Recession and COVID-19 impacted borrowing decisions.
Our findings show that colleges and universities are stable, resilient, and well prepared to weather financial crises. Institutions that significantly increased borrowing during the Great Recession were less leveraged than other institutions and appear to use borrowing to advance their missions. However, institutions on less stable financial footing, including Historically Black Colleges and Universities (HBCUs) and public institutions, may turn to borrowing out of necessity to address budgetary gaps.
While CFOs interviewed for the report acknowledged that borrowing out of necessity is a last resort, they also indicated that institutional and state governance plays an important role in how institutions are able to access and use debt to weather periods of crisis. Explore an executive brief for an overview of our findings and read the full report for in-depth analysis.
This project was made possible through funding from TIAA Institute.