The proposal shows the mounting challenges for small schools to make ends meet.
There is a risk the securities could result in investor losses, the regulator said.
Municipal bond funds saw an outflow of $1.5 billion during the week ended Wednesday.
Strategists say deals can be found in certain types of Build America Bonds.
Schools reporting new instances of impairment, such as defaults, jumped from three in 2022 to 17 in 2023.
Skittish investors have been lured back to the market to get higher yields ahead of interest rate cuts.
The credit quality of states has increased since the pandemic.
Fitch noted enrollment declines as well as pressures on tuition and student fee growth.
Elite private schools and Ivy League institutions are in a “substantially” stronger position, a new report says.
Muni funds experienced $92 million of outflows the week of April 5 alone, according to fund flows data.