Tuition Revenue at Colleges Has Stopped Growing Faster Than Inflation

College students and their families may feel exasperated by the high cost of higher education, but many colleges and universities are facing their own price pressures: Tuition revenue just isn't what it once was.

Modest tuition growth is the new normal, according to a report out Thursday from Moody's Investors Service. The 2015 Tuition Survey predicts net tuition revenue growth between 2% and 3% this year. Net tuition revenue is the amount of money the college takes in from tuition minus the amount it gives out in aid.

"The rate of inflation is outpacing tuition revenue for a growing number of universities," Moody's analyst and report author Erin Oritz said.

Nearly two-thirds of public colleges will have net tuition revenue growth under 3%. That's down considerably from 2005 to 2013, when it grew more than 5% annually at most public colleges. At private colleges, the median increase in tuition revenue will be about 2%, roughly the same as in recent years.

For families, the forecast isn't all that helpful in estimating what you'll be charged for college next year or later. Yes, part of the reason revenues are falling at public universities is state-imposed tuition caps driven by affordability concerns. Such caps or temporary tuition freezes are in place in several states including California, Kansas, and Ohio, and they do directly affect how much a family is charged.

But declining enrollment is also driving the slow revenue growth, especially in regions like the Northeast and Midwest, where the number of high school graduates is shrinking. Overall, about 40% of colleges had lower enrollment in fall 2015 than in fall 2010. The strain is more acute on small regional universities, which rely on in-state students more than large, flagship state universities that can offset limited in-state tuition revenue with extra cash from out-of-state and international students.

Likewise, some private colleges are under more significant pressure than the rest of their sector; about 30% of them are projecting a decline in tuition revenue growth in fiscal year 2016. That's consistent with their revenue growth, or rather decline, last year. By comparison, 70% of private colleges had tuition revenue growth above 5% a decade ago.

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In general, smaller, regional private colleges without wide name recognition are likely to be hardest hit, according to Moody's. Exacerbating the issue of lower enrollment is the widespread and growing use of tuition discounts. More than four in 10 private colleges discount their "sticker price" tuition by more than half.

At wealthy colleges with the highest credit rating, discounting isn't an issue, Moody's says. But at colleges with lower (though, not necessarily poor) credit ratings, discounting has a much larger effect on budgets, since those schools typically don't have large endowments or the same access to outside donations.