In the midst of an uneasy financial climate, Goucher received some positive news in regard to the college’s financial situation. According to debt rating agency Standard and Poor, Goucher’s debt is an A- with a stable outlook. While this might seem like innocuous news, this maintaining of Goucher’s past rating is a big deal in the current financial atmosphere and an even bigger deal in the world of liberal arts institutions in higher education.
View through the perimeter of the construction zone fence on the academic quad. (Photo: Christopher Riley)
Goucher College, like all other businesses, accumulates debt when it takes on projects that can’t be covered by its normal income streams such as tuition. This debt has to be underwritten by another organization. These underwriters look at the risk associated with the selling of the debt and have to decide whether the potential risk of holding the debt outweighs the potential profits that may come from it. In many cases these underwriting organizations, banks, individuals, pension funds, etc., make a profit on the interest paid out by the organization accruing the debt.
The Standard and Poor’s rating is how these underwriting institutions know if the debt is risky or profitable based on the fiscal responsibility of the debtor and the organizations outlook for the future. The debt rating directly affects the interest rate the buyers of our debt will have to pay; the higher the credit rating, the lower the interest.
In a time when most colleges and universities are grappling with one of the most challenging times in recent history, having a good debt rating is essential.
Entrance to Julia Rogers Library construction site. (Photo: Christopher Riley)
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