158 Private Colleges Fail Government’s Financial-Responsibility Test

“By one measure at least, the 2013 fiscal year was a healthier year financially for private colleges than 2012 was. Fewer degree-granting colleges missed the passing mark on the Department of Education’s financial-responsibility test that year, according to aChronicle analysis of data the department released Thursday night,” The Chronicle of Higher Education reports.

“A total of 158 private colleges—108 of them nonprofit, the rest for-profit—failed to achieve a passing score on the department’s test of financial health. (See an interactive table of scores for all 1,880 institutions in the latest test, below.) That’s 10 fewer than in the 2012 fiscal year.

The department calculates the scores by taking into account such factors as colleges’ debts, assets, and operating surpluses or deficits, and developing a single composite score for each institution.

The scores were designed as a tool to help with oversight on federal student-aid funds, but they also are one of the few publicly available nationwide indicators of the financial health of private colleges.

Although the scores often highlight financial problems that are a precursor to colleges’ being sold, merged, or closed, they aren’t always a perfect predictor.”