Hundreds of Colleges Fail to Make the Grade on Financial Responsibility

August 11, 2010

A total of 319 degree-granting private institutions have failed the Education Department's financial-responsibility test at some point in the past three years, receiving a composite score below 1.5.

Notes: All private colleges that award federal student aid must participate in the Department of Education's financial-responsibility test, which is based on information from their audited financial statements. The department develops a composite score on a scale of 3.0 to minus 1.0, based on financial ratios that measure factors such as net worth, operating losses, and the relationship of assets to liabilities. Institutions with scores of 1.5 to 3 pass. In addition to extra monitoring for all institutions that "fail," those with scores below 1.0 are required to post a letter of credit with the department equal to 10 percent of the federal student aid that goes to their students annually. For institutional fiscal years ending between July 1 and June 30. Institutions without a score provided for the selected time periods are indicated as N/A.