News Column

Fitch: Reverse Transfers Present Opportunity to US Colleges

July 1, 2014



NEW YORK--(BUSINESS WIRE)-- The increasing use of reverse transfer agreements could strengthen the demand and enrolment profiles of some colleges and universities and improve their results against performance funding standards, Fitch ratings says.

Funding risks due to uncertainty regarding performance measures, which vary widely across the country, are significant for many colleges. Reverse transfer agreements allow students who transfer from a two-year college to a four-year university to finish an associate's degree with credits earned from the four-year university. Senator Kay Hagan (D-NC) introduced a bill last month that would provide grant funding to states to expand these programs.

With this initiative, community colleges could improve their performance metrics by awarding more degrees. Now, all institutions do not get credit when a student transfers successfully to a four-year school before earning a degree. This may be a large untapped market, as almost two thirds of community college students transferring to four-year colleges do so before earning an associate's degree, according to an April 2014 study by the Community College Research Center at Teachers College, Columbia University.

Four-year institutions may also benefit from more robust enrollment pipelines. These programs could encourage more students to transfer to a university before earning an associate's degree and could strengthen universities' ties with community colleges. Earning the associate's degree post-transfer may also increase the likelihood of student retention and graduation. However, clear evidence of this is not yet available. In Fitch's view, this benefit could be offset if it also means some students, having completed their associate's degrees, are more likely to leave for employment opportunities before completing their bachelor's degrees.

Expanding reverse transfer programs entails administrative burdens including start-up costs, obtaining students' permission to share information and maintaining records and systems. Further, their impact is unclear as performance funding models are still developing at the state and federal levels and vary widely. These models were discussed in Fitch's recent report "Performance Funding in Higher Education," dated May 14, 2014.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Applicable Criteria and Related Research:

Performance Funding in Higher Education

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748024

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Fitch Ratings

Tipper Austin, +1 212-908-9199

Analyst

US Public Finance

33 Whitehall Street

New York, NY

or

Rob Rowan, +1 212-908-9159

Senior Director

Fitch Wire

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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