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Advice for Higher Ed! Wisely Ride the Bond Wave to a Healthy Financial Future

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The COVID-19 pandemic has hit the higher education sector hard. Facing economic difficulties and eyeing low rates, colleges and universities have turned to taxable bond issuance, issuing a record amount of bonds in 2020.

As colleges and universities continue to face higher costs, capped fee structures, reduced international student demand, excessive student loan debt, and more, how they handle this capital will shape their financial future. 

After all, using that capital poorly can put institutions in a bigger hole. It could leave them with less financial resources and flexibility down the line, and ultimately force tough decisions. 

For universities that issued bonds and the students they serve, a lot rides on how this new capital is deployed. In this article, we’ll review how colleges and universities like yours can use this money wisely. This way, you can achieve financial sustainability while continuing to offer students the educational experience they deserve. 

How to do modeling for debt & bond issuance

Between mid-March and late May 2020, colleges sold $8 billion in bonds. Even universities with large endowments, such as Harvard and MIT, seized the opportunity to get debt funding at historically low-interest rates.

Obtaining such capital has been critical, especially since enrollments have declined 2.5% during the COVID-19 pandemic (and tuition makes up more than 46% of revenue for colleges and universities). There’s also a pending enrollment cliff in 2025, so institutions must take steps now to uncover and execute a sustainable financial strategy. 

Now that taxable bonds have been issued, colleges and universities need to plan their futures using financial modeling. This includes figuring out how debt is used. We’ll lay out the steps you should take below. 

Integrate your debt schedule with financial statements

With fixed low-interest rates, taxable bond issuances have given you a cheap way to obtain capital during the COVID-19 pandemic. Now, the money you’ve obtained must be integrated with your three financial statements (income statement, balance sheet, and cash flow statement). 

To do that, create a debt schedule that includes components such as: 

  • Opening balance (total bond amount)
  • Interest expenses
  • Repayments (decreases debt)
  • Draws (increases debt)
  • Closing balance at end of each period

Below is a simple example of what a debt schedule for a 15-year, $10 million taxable bond issue at a 2.2% interest rate could look like: 





Last Year 

Opening Balance

$10 million

$6.973 million

$3.647 million


Monthly Payment





Interest Expense

1st payment: $18.3K

12th payment: $17.3K

61st payment: $12.9K

72nd payment: $11.8K

121st payment: $6.7K

132nd payment: $5.6K

169th payment: $1.4K

180th payment: $119

Closing Balance

$9.430 million

$6.390 million

$2.996 million


Your debt model should obviously break down each year and month of payments. This is just an overview to show you the impact of repayments over time. 

Data from your debt schedule should be updated in real-time and automatically integrated with your financial statements. For instance, the closing balance should flow to your balance sheet and the interest expense should flow to your income statement. This data also should flow to your cash flow statement. 

With your bond repayments fully integrated into your financial statements, you can then figure out how to best use these bonds.

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Understand how investments will perform and affect cash flow

Cash flow is the reason most businesses fail. For universities, this reality is no different. If you don’t emphasize cash flow, it will cost you down the line. 

But how do you predict cash flow in an uncertain world? From pandemics to natural disasters, a lot of unpredictable events can disrupt operations at a university. 

When putting the money you’ve raised from bonds to use, you need to forecast the present value of the investment. As a Seeking Alpha article points out, one dollar today is less than one dollar tomorrow.  

A tool like discounted cash flow analysis can help. Discounted cash flow analysis allows you to see if you’re using your bond money and other resources wisely. Discounted cash flow calculates whether an investment is profitable using your weighted cost of capital and analyzing cash flow over time from the investment. It’s a powerful formula for deciding whether something makes sense financially. 

dcf formula

This is a discounted cash flow analysis formula from Seeking Alpha. Discount rate is a rate of return that helps calculate the present value of future cash flows. 

It’s amazing how much doing discounted cash flow analysis can help. For example, Endicott College used cash flow analysis with their financial modeling to prioritize projects on campus such as a parking deck, dorm remodel, and ERP implementation. After crunching the numbers, exploring funding options, and running different scenarios, they figured out how to best prioritize projects while realizing a few initiatives weren’t financially viable. 

Ultimately, what discounted cash flow analysis can tell you is: 

  1. Is this project, initiative, or use of money financially viable?
  2. How should I pay for this project or initiative?
  3. Will I have sufficient cash flow three, five, or ten years from now?

For instance, given the low borrowing rates, you may discover those bond funds are best used for capital-intensive projects you’ve put off for some time, such as new construction, infrastructure improvement, and new student recruitment campaigns. These long-term investments are perhaps best funded by long-term, low-interest debt. 

data has a better idea

Keep in mind credit ratings 

Even before the COVID-19 pandemic, Moody’s credit ratings had downgraded many colleges. In 2019, Moody’s downgraded 25 schools while upgrading less than 10. In 2020, S&P Global Ratings slashed the outlook for 127 colleges. This reflects stressed operating budgets due to lower enrollment, higher costs, and remote learning. 

For colleges and universities that have issued bonds, or those planning to raise funds through bond issuance, keeping credit ratings intact should be a priority. So, focus on all factors of a credit rating. 

Moody’s rating methodology analyzes a university’s: 

  • Market position
  • Relationship with your state
  • Balance sheet strength
  • Access to financial resources
  • Debt position
  • Operating performance
  • Strategy and management

Remember: A downgrade from Moody’s and other credit rating agencies can make it harder and more expensive to obtain capital. This can not only limit your organization financially, but also can magnify financial mistakes. And as the COVID-19 pandemic has taught us, borrowing is sometimes necessary to overcome difficult times. Without the ability to borrow at affordable rates, the next unexpected event may derail your university’s finances.

So, when deciding how much to raise through debt issuance, do your due diligence. Perform sensitivity analysis and impact analysis. By simulating scenarios, you can stress test your organization and see how bond issuance affects your balance sheet strength, debt position, operating performance, and more. You can see the range of possibilities when it comes to projections for revenues, cash flow, and debt service coverage. Then, you’ll have more clarity on how much to raise and how to use those funds in a manner that keeps your credit rating healthy. 

A challenge universities face with debt modeling

Perfect financial modeling doesn’t exist. No matter how well you plan, you never know exactly how the future will unfold. 


Universities can put together solid strategies for using their new capital, but that strategy won’t hold up if you don’t plan for the unexpected. As we’ve seen, the world can change overnight and you have to be prepared for all sorts of futures: 

  • Changes in market demand: Could student loan forgiveness programs give rise to more students? Will the enrollment cliff be worse than expected?
  • Unforeseen events: What would you do if your college had to deal with another pandemic, a natural disaster, or other catastrophes?
  • Macroeconomic factors: High unemployment, a financial crisis, and other market conditions could all affect enrollment and revenue. 

When you consider all that could occur, you can envision a whole range of potential outcomes. You have to prepare for every scenario when you deploy the money you’ve raised from taxable bond issuance. 

The question is: How do you prepare for all these potential outcomes?


Synario: Your tool to make the most of issuing bonds

To have success with bond issuance, you have to see the whole landscape. You can’t rely on simple debt models within spreadsheets. Not only are spreadsheets prone to human error, but they’re also two-dimensional and don’t update in real-time. 

Simply put, ditch the spreadsheets

To understand what to do with the money you’ve raised, you need a solution that allows you to see every scenario. That solution is Synario

With Synario, you get a flexible modeling tool for financial planning, forecasting, and reporting. Using patented layering technology, pre-mapped algorithms, and powerful visuals, you can leverage this solution to plan around an uncertain future. 

Our solution is easy to use. The tool has pre-programmed sliders and levers so you can run calculations quickly and simultaneously test countless assumptions and outcomes. When data updates, you don’t even have to change the underlying formulas. You can quickly test what happens if you use the funds for one project versus another. You can even analyze the worst, base, best, and unexpected scenarios. 

Amidst uncertainty, Synario can give you clarity and make the best decisions. If your university depends on utilizing these funds from bond issuance correctly, you need the best tools.

Want to see how Synario can help make your bond issuance the ultimate success? Click the link below and we’ll show you how it works.