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Assessing Financial Responsibility

Institutions of higher education receive nearly $100 billion in state and local funding each year. Given the enormity of this public investment at the state and local levels, not to mention the additional $120 billion in federal financial aid funding provided to these institutions, officials at all levels of government should be interested in ensuring that colleges and universities are “financially responsible” and have the ability to manage these public dollars well. Unfortunately, the composite scores used by the Department of Education to assess financial responsbility have important flaws and have failed to identify schools at risk of financial collapse.

Bottom Line

Considering the volume of school closures in recent years— over 1,000 campuses since 2014—it is clear that states need to pay close attention to early warning signs of financial trouble. It is equally clear that relying on the Department’s federal composite score as an indicator of financial responsibility is insufficient.

Read Our Report

Assessing Financial Responsibility: How States Can Do Better 

Further Reading

Lauren Camera, US News: The Higher Education Apocalypse

Rick Seltzer, Inside Higher Education: Regulating College Closures

Scott Cohn, CNBC: The Other College Debt Crisis: Schools are going broke