NAICU Washington Update

Department Releases Financial Responsibility Scores

July 25, 2013

The financial responsibility scores for FY 2011, expected last fall, were finally released this week. In prior years, the scores had been published much earlier.

A Chronicle of Higher Education story said that more than 150 private nonprofit and for-profit institutions failed to receive passing financial responsibility scores.  All colleges must be deemed financially responsible for their students to be eligible to receive federal financial aid. Only privates are subject to the financial responsibility ratios test that produces composite numerical scores. 

The Chronicle article asserted that the number of failing nonprofit colleges was 116, noting that was less than in FY 2010.  However, in a letter to NAICU this spring, Under Secretary Martha Kanter put that number at 73, which is what NAICU calculated as well.

Although the scores of some colleges may reflect financial strain, in many cases the scoring system itself may be at fault.  NAICU’s task force on financial responsibility produced a report last November that showed the Department of Education does not always use the most up-to-date accounting standards, and thus some colleges may receive failing scores despite being financially viable.  This was especially the case for scores from July 2008 through June 2009, when the national economic downturn caused precipitous declines in the value of many institutions’ endowments.  In a number of instances, the Department classified such losses as annual operating expenses. 

Colleges that have received failing FY 2011 scores should have already been notified by the Department.  NAICU has reached out to NAICU members on the list, with background on the ratios test for their use in responding to media inquiries, and is providing additional targeted support to members who feel they received a failing score inappropriately.

MORE News from NAICU