The University of Chicago won back stable rating outlooks as investment returns swelled last year and student-driven revenues bounce back with a return to campus.

The selective private school’s enrollment levels and fundraising also weathered the COVID-19 pandemic, factors that have especially benefitted the ratings of higher-grade, private schools with healthy endowments and strong student demand.

Moody’s Investors Service on Jan. 14 revised the university’s outlook to stable from negative and Fitch Ratings followed with the same action Thursday. Fitch rates the university AA-plus and Moody’s rates it Aa2.

The two moved the university’s outlook to negative in the summer 2020 ahead of a bond sale as the pandemic’s fiscal threats weighed on the ratings.

“The revision of the outlook to stable reflects a combination of improved operating performance and significant wealth growth following strong investment returns and exceptional fundraising,” Moody’s said.

The university saw a healthy 38% return on investments and $631 million in gifts and commitments also helped pad the bottom line driving a 32% increase in cash and investments.

University operations returned to positive territory in fiscal 2021 after ending fiscal 2020 with a 4% operating deficit. Results may thin this year as the university restores some spending cuts undertaken early in the pandemic but Moody’s believes longer-term stability is near as officials work to “create a sustainable structurally balanced budget.”

Fitch said its move to a stable outlook reflects its “belief that long-term adjusted cash flow margins after fiscal 2022 will remain reasonably consistent with the historical track record and in line with Fitch’s assessment for private universities” in the 10% to 15% range.

The school’s $2.5 billion of revenue also comes from diverse sources including student-related payments, government grants and contracts and patient care. That mix offers some insulation against volatility.

Reliance on endowment draws does add some risk because it fluctuates based on returns. The endowment totaled $9.5 billion in fiscal 2021, up 45% since 2017.

The rating “reflects UChicago’s exceptional demand profile, with steady full time equivalent enrollment despite the coronavirus pandemic, and among the most selective admissions standards in the industry,” Fitch said. “The university has an excellent fundraising track record.”

Material labor and general inflationary expense pressures and the pandemic’s lingering effects on the broader economy pose ongoing strains. The school received about $40 million and its medical center $218 million in federal COVID-19 relief.

S&P Global Ratings last week affirmed the prominent private school’s AA-minus rating and stable outlook.

“We believe that the university’s demand characteristics and liquid resources help offset medium-term pressures that might arise as a result of this pandemic,” S&P said. “Over the longer term, we expect that health care revenues and university revenues should stabilize and operating performance could improve and benefit from the diversity provided by the patient revenues, research, and student driven revenue sources.”

The university has a total of about $5.35 billion of debt outstanding when counting $219 million of operating leases and $1 billion of medical center debt.

The medical center is separate not-for-profit entity. No near-term borrowing is planned.

Public university funding levels have survived and in some states even improved as state budgets have been propped up with federal aid and ballooning tax revenues while the University of Chicago has managed through the pandemic due to its size, diversity of revenues, and national renown.

Rebounding auxiliary revenues from students’ return to campuses after most schools shifted to remote learning in 2020 has aided the prospects this year for all schools as housing, parking and athletics-related revenues pick up. Operating revenues are expected to rise nationally between 4% and 6% with students having returned to campus last fall, according to Moody’s.

The University of Chicago moved to remote learning early in the pandemic and restored some campus activity in the fall of 2020 with a hybrid plan in place through the academic year. While the fall of 2021 semester began on campus because of the surge in omicron cases, the university delayed the winter term.

Market participants see pandemic fallout continuing and in an uneven way across the sector with many facing a tougher recovery and those concerns are displayed in their sector outlooks.

With the federal relief spigot closing, smaller institutions without substantial endowments that have benefitted from eye-popping market returns and those that can’t afford competitive aid packages, or are generally struggling to attract students, cast uncertainty on the sector.

“Federal aid to higher education institutions, outsized investment gains, and taxable borrowings at historically low rates bolstered the liquidity and balance sheets for the sector,” Municipal Market Analytics said in January in its sector outlook report.

MMA is holding higher education at the neutral level for the first half of 2022. It moved to neutral from negative in the second half of 2021.

“The benefits were not uniformly felt” as endowment returns benefit those with already substantial reserves the most “and the credit gap continues to widen between the financially and reputationally strong and smaller, less competitive institutions,” according to MMA, which said the sector suffered one bond default and six impairments.

S&P moved its not-for-profit higher education outlook to stable on Jan. 20 after four years at negative in recognition of federal emergency funding, record investment gains, and rising auxiliary revenues but analysts there too believe headwinds remain.

“While financial flexibility has improved, additional risks remain, such as inflation, coronavirus variants, and enrollment pressures,” S&P said. “Schools with weaker demand and financial profiles still have less operating flexibility and could face credit deterioration.”

Moody’s in December maintained its stable outlook on the sector. The rating agency last March moved the outlook to stable from negative.

“The 2022 outlook for U.S. higher education is stable as students’ return to campus in fall 2021 underpins growth in tuition and auxiliary revenue, though with some continuing effects from the pandemic,” Moody’s said. “Very high investment market returns have bolstered institutions’ wealth and liquidity while making strong giving to the sector more likely in 2022.”

In addition to grappling with inflationary costs and labor shortages, Moody’s also warns that institutions must address social risks such as inequality of access and affordability amid already strained budgets.

The University of Chicago was founded in 1890 on Chicago’s south side in the Hyde Park neighborhood. The University’s fall 2021 freshman acceptance rate was a highly selective 6.5% based on nearly 38,000 applications, Fitch said. Fall 2021 enrollment was at nearly 17,900 students, continuing a trend of steady enrollment growth in recent years.

In addition to its undergraduate and graduate schools, the university operates the Argonne National Laboratory and Fermi National Accelerator Laboratory in Illinois and is the sole corporate member of the Marine Biological Laboratory in Massachusetts. The school is a leading recipient of federal funding.

The medical center has no legal obligation to support university-related debt, although UChicago would be required to assume some UCMC debt if UChicago terminated the affiliation agreement or lease with the medical center.

The university’s leadership has seen some changes of late. Its president, Robert Zimmer, transitioned to a newly created chancellor role last September and Paul Alivisatos was appointed as the new university president.

The university continues a search for a new chief financial officer. Brett Padgett, assistant vice president for financial planning and analysis and chief of staff for finance and administration, has been interim CFO since Ivan Samstein moved to manage the medical center’s finances last year.