Puerto Rico's faltering economy and dire fiscal situation pose a threat to its universities, including the University of Puerto Rico, whose rating was already downgraded in June, according to Standard & Poor's.
Higher education institutions on the island may struggle in the year ahead, the ratings agency said in a report issued on Thursday, as the US commonwealth negotiates with creditors over ways to reduce its debt load and the government's finances continue to be constrained.
Puerto Rico is working to restructure $72 billion in debt. Many Puerto Ricans are leaving the island, whose economy has been at or near recession for almost a decade, for the mainland US
S&P downgraded the University of Puerto Rico, the largest on the island, in June to 'CCC-' because of its significant dependence on revenue from the government. A delay or reduction in appropriations could have a serious effect on the university, according to S&P.
The ratings agency also downgraded University of the Sacred Heart, a private institution, this month to 'BBB-' from 'BBB' because of decreases in enrolment and the island's economy.
"Declining enrollment could jeopardise tuition revenue if the number of students decreases sharply," according to S&P. "In turn, if management teams are not able to cut expenses to match enrolment levels, operating performance could suffer."
Private institutions are vulnerable to the island's economy, making the universities and colleges less affordable and creating enrolment pressure, according to the ratings agency. There are also fewer high school students graduating in Puerto Rico in recent years, S&P said.
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