Dive Brief: 

• Moody's Investors Service rated a new transfer agreement between Southern New Hampshire University and Pennsylvania's 14 community colleges as credit negative for the state's four-year universities. 
• The arrangement allows the state's community college students to transfer up to 90 credits toward an online bachelor's degree at Southern New Hampshire and to receive a 10% discount on their tuition. This will rev up competition for students among Pennsylvania's four-year colleges, analysts wrote. 
• The Pennsylvania State System of Higher Education (Passhe) and Temple University, which heavily rely on transfer students to fill their seats, could be particularly susceptible to the increased competition. 

Dive Insight: 

The deal marks the first agreement between all of a state's community colleges and a four-year institution. Attending Southern New Hampshire will cost transfer students from two-year colleges $288 per credit hour, a rate lower than what they would pay at nearly any other public college in the state. 

In comparison, the online-only Penn State World Campus, which enrolled around 8,300 undergraduates in the fall of 2018, charges between $576 and $617 per credit for its undergraduate classes. 

In a statement emailed to Education Dive, Penn State said it has "a long history of working constructively with other institutions across Pennsylvania" and "will continue to collaborate." Penn State World Campus enrollment grew slightly in 2019, driven by graduate students.

It's too soon to know how the Southern New Hampshire deal will affect enrollment at the state's four-year universities, but Moody's analysts predict it will be an attractive option for students with financial restrictions. It also raises the possibility that other online-focused institutions will target Pennsylvania. 

In the 2018-19 academic year, about 500 students transferred to Southern New Hampshire from a Pennsylvania community college. However, the large majority of the roughly 30,000 students who transfer from the system to a four-year college each year choose an institution within the state. 

Students studying online typically pick colleges located nearby. Three-quarters of full-time, online-only students enroll in an institution within 100 miles of home, according to a 2019 report from Entangled Solutions. 

"One reason that students select an institution close by is because of recognition in their communities," said Carol Aslanian, president of Aslanian Market Research at EducationDynamics, in an interview with Education Dive. "The institution nearby is known by employers, it's known by your family and your friends. It has an area reputation." 

But competitive tuition pricing and the ease of transferring credits could be a strong enough draw for Pennsylvania students to choose an out-of-state option, she said. 

That would likely hurt colleges in Pennsylvania that have large shares of transfer students, even though they don't all originate from two-year institutions, the Moody's analysts note. Transfer students made up almost a quarter (24%) of Passhe's fall 2019 enrollment and one-third (31%) of Temple's. 

"We're confident in our market position as an affordable, in-state option for students looking to advance their education and careers," David Pidgeon, a Passhe spokesperson, said in an email to Education Dive. "We've been here for more than a century, and we're working to ensure there's at least another century ahead of us." 

The system's board of governors recently approved a new tuition policy that sets prices for two years at a time. The move is meant to make it easier for families to predict the cost of attendance. 

In a statement emailed to Education Dive, Temple said it is "actively engaged in defining its opportunities for the next decade," including those beyond its hometown of Philadelphia.

But the deal could also complicate efforts by the state's universities to grow online. More than 17% of students at Passhe schools and Temple participate in some form of online instruction, though fewer are exclusively enrolled in online classes, Moody's analysts note. 

Earlier this month, Passhe Chancellor Dan Greenstein called on state lawmakers to invest more in higher education, describing the moment as a "turning point" for the struggling system. Passhe is requesting a 2% year-over-year increase in state appropriations, as well as $100 million over five years to help centralize administrative functions and potentially support online educational opportunities. 

The stakes are high for Passhe. Its enrollment is declining, and at least two campuses have fewer than half the students they had a decade ago, according to a local media report. 

One way regional colleges could compete with national online universities is by offering accelerated and flexible programs, Aslanian said. Another route is through hybrid courses. 

"Only area institutions could do that — unless you want to drive from Pennsylvania to Manchester, New Hampshire," she added.