We need to make sure that the college we are going to will probably be there for all 4 years. With the current environment we have, it is possible that we will see 25% to 50% of colleges fail in the next 20 years.
Here is consumer Forbes article: College Financial Grades 2021: Will Your Alma Mater Survive Covid?
Here is a more inside industry discussion.
The Department of ED
The DOE’s HCM list underreports the number of American colleges and schools that are in financial trouble. Nevertheless, the list is useful, it shows a significant number of small, private nonprofit colleges are in trouble, including many with religious ties. It also shows that many small for profit institutions are in trouble, especially those focused on cosmetology. The HCM list for March of 2021 can be downloaded here.
The methodology can be found here.
The U.S. Department of Education may place institutions on a Heightened Cash Monitoring (HCM) payment method to provide additional oversight of cash management. Heightened Cash Monitoring is a step that FSA can take with institutions to provide additional oversight for a number of financial or federal compliance issues, some of which may be serious and others that may be less troublesome. There are two levels of Heightened Cash Monitoring: Heightened Cash Monitoring 1 (HCM1): and the more severe Heightened Cash Monitoring 2 (HCM2).
Financial Responsibility Composite Scores reflect the overall relative financial health of institutions along a scale from negative 1.0 to positive 3.0. A score greater than or equal to 1.5 indicates the institution is considered financially responsible.
|The following provides additional detail about the reasons institutions are placed on HCM|
|Accreditation Problems||Includes accreditation actions such as the school’s accreditation has been revoked and is under appeal, or the school has been placed on probation.|
|Administrative Capability||Concerns about the institution’s ability to manage the Title IV programs including student file maintenance, record retention, and verification.|
|Audit Late/Missing||School did not submit their audit by the due date and is considered not financially responsible.|
|Audit – Severe Problems||School has severe audit findings which could include financial statements, internal controls, and compliance with laws, regulations, and provisions of contract or grant agreements.|
|Default Rate||A school’s cohort default rate for Perkins loans made to students for attendance at the school exceeds 15% or the cohort default rate for Federal Stafford loans or for Direct Subsidized/Unsubsidized Loans made to students for attendance at the school equals or exceeds 30% for the three most recent fiscal years or if the most recent cohort default rate is greater than 40%.|
|Denied Recert – PPA Not Expired||School’s recertification was denied but its Program Participation Agreement has not yet expired.|
|F/S Late/Missing||Financial statements were not submitted to FSA by a specific due date, depending on the institution’s type (public, private non-profit, proprietary).|
|Financial Responsibility||School has a failing or a zone composite score or other concerns such as unreconciled accounts.|
|OIG||Under investigation by the Office of the Inspector General.|
|Other (Common Ownership)||The common ownership of certain institutions that had issues identified at some of their schools.|
|Other -CIO Problems (Eligibility)||Issues identified with information needed on a Change in Ownership application such as missing/incorrect same-day balance sheet or other needed documentation; or an unreported CIO is discovered.|
|Outstanding Liability/Offset||School has outstanding liabilities that resulted from an audit or program review.|
|Payment Method Changed||Used in various other scenarios not otherwise identified where funds control are needed, such as a foreign school has lost eligibility but provisions allow for additional disbursements to students for an extended period of time.|
|Program Review||School is being reviewed by the Department as part of its normal oversight and monitoring responsibilities or as a result of concerns regarding the school’s administrative capability and financial responsibility.|
|Program Review – Severe Findings||School has potential of severe program review findings such as failure to make refunds or return of Title IV funds.|
|Provisional Certification||School is participating in Title IV programs under a provisional certification which imposes certain restrictions.|