As If It Weren’t Bad Enough

Moody’s Investor Service said on Friday that it may downgrade the credit rating of Penn State University, due to the potential fallout from the recent sexual abuse scandal. Their debt is now rated at Aa1, one notch below triple A.

As John Nelson, head of higher education research at Moody’s, explained, “Higher education is first and foremost a business that is driven by reputation.” With that reputation irrevocably tarnsihed, the business of Penn State has certainly hit a rough patch.

Moody’s will evaluate the scope of the potential repercussions, including drops in enrollment and donations, as well as lawsuits and settlements. The football program at Penn State contributes just 2% of the school’s total revenues. But, as Mr. Nelson warned, “The larger potential impact of recent events is reputational.”

Thomas L. Hauch