150 private colleges fail DOE financial test
A report out Thursday from the Chronicle of Higher Education says 150 private, non-profit colleges failed the U.S. Department of Education's "financial responsibility test," based on their condition in fiscal year 2009.
The number of colleges to fail the fiscal test has risen 70 percent in two years, a time of plummeting endowments.
The list includes some notable schools. One is Mary Baldwin College, an antebellum women's college in Staunton, Va. The school's rating dropped from a nearly perfect 2.9 last year to a sub-par 1.3 this year.
(Colleges are scored on such measures as net worth, operating losses and the ratio of assets to liabilities. Each receives a rating between 3.0 and negative 1.0; anything below 1.5 denotes failure.)
Mary Baldwin is one of the oldest women's colleges in the nation, and is ranked as a top-tier master's level university in its region by U.S. News & World Report.
Ripon College in Wisconsin failed the federal test this year, as did Guilford College in North Carolina.
Other mid-Atlantic schools on the list include Virginia Intermont College, a liberal arts school in Bristol; Edward Via Virginia College of Osteopathic Medicine; and Tai Sophia Institute, a holistic health graduate institution in Laurel.
The Chronicle reports that 37 for-profit colleges failed the financial test, 11 fewer than in 2007. That list includes Southeast Culinary and Hospitality College, Miller-Motte Technical College and ACT College, all in Virginia.
Failure on the federal test "is typically an indicator of a college's overall financial fragility," the Chronicle writes. But several nonprofits, including Ripon, told the publication they were on the list chiefly for plummeting endowment value.
A failing score "has also become a signal to investors that an institution could be ripe" for takeover by a for-profit company, the Chronicle reports.
But the National Association of Independent Colleges and Universities said in a statement that prospective students should not make too much of the list:
"Americans whose students attend, or are considering attending, one of the institutions on the list, should not rule out a college simply because it's listed. In many cases, colleges only appear on the list because of accounting methods that do not consider the institution's overall resources. Some schools that were initially on the list now are off because of Departmental calculation errors. Others appear on the list based on the day the snapshot was taken, and today would pass the test with flying colors."
(The full statement is in the comment section, below.)
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Daniel de Vise
August 12, 2010; 2:15 PM ET
Categories: Administration , Finance , For-profit colleges , Research | Tags: Education Department Financial Strength test, chronicle financial strength, college endowments, college finance, colleges fail financial test, mary baldwin college
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