Education Dept. Miscalculates ‘Financial Responsibility’ Scores, Private Colleges Say

This month, the U.S. Department of Education will publish the annual financial-responsibility scores of thousands of private colleges. The scores are one of the few publicly available, broad-based indicators of individual institutions’ financial health. Or are they?

According to three major higher-education associations and several colleges and private accountants, the scores are often inaccurate and misleading, because the department misapplies its own rules when making its calculations.

The critics also contend that aspects of the 14-year-old formula used to calculate the scores are flawed and outdated.

For more than a year, groups including the National Association of College and University Business Officers and the National Association of Independent Colleges and Universities have pressed the department to re-examine how it calculates the scores. They are derived from the audited financial statements that colleges are required to submit annually to the department. The scores are important because they help determine whether and how freely colleges can participate in federal student-aid programs.

The business officers’ group has documented five areas where, it contends, the department is miscalculating the scores. And the private-college association says the department’s inconsistent application of formulas among its 10 regional offices compounds the unreliability of the scores as a measure of colleges’ financial health.

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