Part 4: Institutional Financial Responsibility

Recommendations:

A. Public institutions, consistent with U.S. Department of Education policies, should be presumed to be financially responsible by virtue of their status as state institutions enjoying the financial backing of their state, subject to certain filing requirements of the Department to meet "past performance and affiliation standards."

B. A private non-profit or for-profit institution should be determined to demonstrate sufficient financial strength for initial inclusion and continued participation in the interstate reciprocity agreement in either of the following two situations:

1. The institution is eligible for federal Title IV student financial aid programs plus the U.S. Department of Education, for the institution’s most recent fiscal year for which data is available, has not determined it to have a financial responsibility composite score below 1.5. (Only institutions with composite scores of 1.4 or lower are currently notified of their scores.)
2. The institution is otherwise eligible for federal Title IV student aid programs, has a financial responsibility composite score of 1.0-1.5, and the state has determined, upon examination of additional supporting material, either that the institution has sufficient financial strength for inclusion or that the reason for the score being between 1.0 and 1.5 is the result of accounting error or the misapplication of generally accepted accounting standards in the calculation of that score.

C. The state should use the method described in section B(2) for two consecutive years to determine financial responsibility, assuming that the institution remains eligible for Title IV student aid programs.

D. A private non-profit or for-profit institution should no longer be eligible if in the third year its composite score remains below 1.5, even if the institution remains eligible for Title IV programs.

E. A private non-profit or for-profit institution that has lost its approval to participate in its state’s reciprocity agreement under recommendation 5D, but remains eligible to participate in federal Title IV student aid programs, should meet the financial responsibility requirements of the reciprocity agreement if and when the U.S. Department of Education determines the institution no longer has a financial responsibility composite score below 1.5.

F. The Department of Education should review and consult outside expertise on the accounting approaches it uses to determine institutions’ composite scores for financial responsibility purposes.

Check back soon to submit your thought and comments.