Moody’s knocks a private Vermont college deeper into junk

Years of declining revenue have pushed Saint Michael’s College’s Moody’s rating lower and lower. On Tuesday, Moody’s Ratings downgraded the college once again, to B3 from already speculative-grade B1. 

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The Vermont college has tried to counter declining demand with lower tuition, causing years of negative operating margins, Moody’s said in its downgrade report.

Saint Michaels had $57.9 million of outstanding debt in fiscal 2025, issued through the Vermont Educational and Health Buildings Financing Agency. It last issued bonds in 2023. 

Saint Michaels is a small, Catholic, private liberal arts college, with a focus on “experiential learning,” according to Moody’s. 

The school has $100 million of reserves, which Moody’s says can provide “near-term flexibility” as its management tries to stabilize its finances and improve operations.

“The college’s ability to translate previously articulated strategic initiatives into improved operating performance will be critical,” Moody’s said.

However, Moody’s analysts expressed skepticism that management would be able to right the ship.

“While management has historically taken steps to align budgets with revenue pressures, the persistence of operating deficits underscores a mixed record of execution,” Moody’s analysts wrote. “Execution challenges to date have resulted in three consecutive years of negative EBIDA through fiscal 2025 and continued enrollment declines and a growing discount rate.”

Moody’s analysts also flagged Saint Michael’s “delayed investment in campus facilities.” The college’s average plant age is 24 years, according to the report. 

Moody’s assigned a stable outlook to the rating, citing the school’s reserves, gift support, and investment returns, which can partially mitigate its operating challenges. The outlook was negative before the downgrade.

The factors pressuring Saint Michael’s have affected many small higher education institutions. 

A shrinking college-aged population is lowering demand sector-wide and particularly in the Northeast. Schools with bigger brands — prestigious private universities and large, flagship public universities — have had an easier time, but small liberal-arts schools have struggled, and many have closed in recent years. These problems are especially pronounced in the Northeast, where there’s an oversupply of higher education institutions and weaker population trends. 

Saint Michael’s rating has been on a downward trajectory for years. Moody’s downgraded Saint Michael’s to Baa2 in 2020, then to Baa3 in 2022, and sending it in December 2022.

S&P affirmed its BBB-minus rating and negative outlook for Saint Michaels in July. It cut the outlook to negative in 2024.