Harrisburg University misses monthly interest payment


Harrisburg University of Science and Technology violated its bond covenant at the beginning of the month when it missed a monthly $1.2 million interest payment to the bond trustee.

Jessica Warren, Harrisburg University’s executive director of marketing and communications, said the university only needs to make interest payments twice a year on its outstanding bond issuances from 2017 and 2020, but the monthly payments to the trustee go toward those debt service payments.

“It is important to note that there has not been a default on the required semi-annual payments on the bonds; the university just made one in April 2024,” Warren said. “The university has made all semi-annual payments on the bonds. This payment was duly executed as scheduled, reflecting our commitment to meeting our financial obligations.”

Warren said the university intends to make its semi-annual bond payments as it has in the past.

The university declined to say whether it will make its June loan payment. 

Harrisburg University has fallen victim to many of the broader pressures on the higher education sector.

This situation was not difficult to predict, according to S&P Global Ratings analyst Ruchika Radhakrishnan — S&P downgraded Harrisburg in November from BB to BB-.

The school’s financial statements, disclosed on EMMA, showed that the university is incurring more costs and less revenues than it budgeted. In April, it expanded its line of credit from Members 1st Federal Credit Union from $5 million to $9 million.

Like many higher education institutions, the university’s financial woes started when enrollment dropped thanks to the COVID-19 pandemic.

When a university has a smaller freshman class, its tuition revenue will be lower not just for that year, but for the next three years. Additionally, as undergraduate enrollment continues to decline, many universities are offering more money in scholarships to attract students, which lowers tuition revenue. 

Thus, several colleges and universities have closed or defaulted recently. These problems have been especially pronounced for smaller schools in the Northeast, where the number of schools and declining college-aged population make competition especially steep.

Harrisburg University has suffered from all of these trends; however, the school has had a unique business model since its founding in 2001.

Harrisburg University has a much higher-than-average international student body, Radhakrishnan said, and the majority of its students are obtaining graduate degrees — historically, only around 20% of its students have been undergraduates. 

This business model was advantageous, but it carried risk, Radhakrishnan said, which is why S&P always rated Harrisburg University fairly low. 

Those risks were realized when COVID-19 prevented international students from attending school in the U.S. This demographic has been slower to rebound since the pandemic as it has also become more difficult to obtain student visas, Radhakrishnan said.

However, Harrisburg University’s unique business model may become a benefit once again in the future, Radhakrishnan said, because as the college-aged population is set to plummet in coming years, the number of graduate degree seekers is growing slightly.  

“The university total headcount for 2023 is 5,749 and total headcount for 2022 was 5,690,” Warren said.

The university may make some revenue from its campus in Dubai and UPMC Health Sciences Tower, both of which opened last year. 

The Dubai campus, where students can earn a master’s degree, is in a location accessible to students from India and China, Radhakrishnan said. 

The university’s 2020 bond issuance funded the tower. The university received some revenue from selling the naming rights to UPMC, and hopes to use the tower to expand its medical degree programs. 

The building’s facilities can hold 1,000 students in programs like nursing, pharmaceutical sciences and related fields and is part of a 10-year partnership with UPMC. The university is not yet using every floor of the building, and hopes to expand its use over time.

“The advanced manufacturing and health sciences programs are expanding and growing; the building has additional capacity as we intend to grow,” Warren said.

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