Colleges, universities and the government entities that regulate them have long been skittish about publishing ratios, metrics and models that seek to make plain which higher education institutions are in financial danger.

Five years ago, for instance, the Department of Education resisted sharing the names of dozens of colleges and universities on its heightened cash monitoring list. In the competitive higher education environment, “any public release of the confidential financial standing of these institutions will likely cause the institutions substantial competitive injury,” a department official wrote at the time.

The department reversed course under pressure in 2015, eventually sharing the names of institutions on different levels of the heightened cash monitoring list, which can restrict how colleges access federal financial aid dollars. Releasing the names was “doing what’s right for good government and transparency’s sake,” then Under Secretary of Education Ted Mitchell said at the time. The department had to use federal aid in a way that was accountable to students and taxpayers, he further explained.

Even then, Mitchell cautioned that colleges could be placed on cash monitoring for reasons of varying severity. A college might find itself on the list for submitting an audit late. Or the department might have flagged it for concerns about its financial viability.

The cash monitoring situation encapsulates arguments for and against publicly listing colleges under financial stress. From one perspective, doing so risks hurting weaker institutions. In the worst cases, it could be a self-fulfilling prophecy, as the list itself becomes one more reason flagging institutions struggle to draw students.

From the other perspective, though, the higher ed market needs more transparency. Students should have access to all the good information they can get. Then they can vote with their feet and tuition dollars. They can enroll in risky institutions with their eyes wide-open to potential shortcomings or choose other, more stable options.

That discussion is pertinent today as Inside Higher Ed writes about an aborted attempt to publish a list of 946 colleges and universities forecasting the number of years each has until its projected net expenses exceed its projected net assets -- a point at which it would likely be at severe risk of closure. The list doesn’t carry all of the baggage as would a list maintained by the Department of Education or other regulator. Edmit, which compiled the list, is a college advising and recommendation company, not an entity with the power to impose sanctions on institutions or revoke their ability to receive federal financial aid funding.

“We wanted to create something that was more transparently available to families and also simple enough to understand for a broader audience so that it can actually inform people’s decision making and understanding of what’s happening,” said Sabrina Manville, co-founder at Edmit.

Edmit backed away from plans to publish its list after private nonprofit colleges and their lobbyists mounted an intense pressure campaign. So this is an ideal moment to remember the long, uneasy and uneven relationship between higher education and public information about college finances. It’s also a good time for a reminder that no single metric can capture the financial complexity of a college or university, nor can it take into account the many different steps institutions can take to turn around their fortunes.

Important Caveats

College finance experts are quick to caution that the publicly available data on which college financial metrics can be based can’t cover key elements of institutions’ viability.

Consumer-focused lists and grades, including Edmit’s, generally draw their information from the Department of Education’s Integrated Postsecondary Education Data System. IPEDS contains a considerable breadth of information, but the data can lag -- the most recent financial data available is for 2016-17. And like any set of financial data, it doesn't address difficult-to-measure intangibles that can go a long way in keeping open a struggling college.

Accountants can count the amount of cash a college has in the bank, the revenue it brings in and the size of its endowment. But it’s much harder to quantify how much money its alumni might be willing to give if they find out it’s in trouble.

Think, for example, of Sweet Briar College or Bennett College, two institutions that have so far survived near-death experiences with the help of massive fundraising efforts.

So too is it hard to say exactly how much and how quickly any individual college can slash spending. Different staffing structures and facilities costs at colleges can make it much easier or harder to save money by cutting employees or deferring maintenance.

It’s also hard to predict how much a college might be able to borrow in order to bridge certain financial gaps. A good relationship with a local bank might go a long way toward finding financing on surprisingly lenient terms.

And then there are a host of changes that could happen in the future that are impossible to predict. Increases in the minimum wage could hurt colleges’ financial viability if they translate to higher costs among workers. New state financial aid programs or increases in the federal Pell Grant could provide important additional funding for colleges on the brink. Recessions can wreak havoc on financial projections as more students enroll in college in order to avoid bad job markets -- but those students are often less able to pay their tuition than they would have been during an economic expansion.

All of those individual factors unfold as colleges and universities try new strategies to solidify their futures. Colleges that found themselves misaligned with demand in the past might reposition themselves for a stronger-than-expected future.

As a result, experts at the National Association of College and University Business Officers are “very cautious” about different indicators seeking to show future financial risks at colleges.

“I have not seen a particular metric or body of work with some predictive capabilities,” said Sue Menditto, senior director of accounting policy at NACUBO. “As much as we talk about the use of predictive analytics in higher ed, institution-specific, I’ve not seen anything like a model that is predictive and has been tested with any amount of efficacy.”

A retort is that the future is always filled with uncertainty. Students are being asked to take risks when they enroll in college, pay tuition and, often, mortgage their future by taking out student loans.

“A big part of what we do at Edmit is help people to understand the return on investment on their college vision,” said Nick Ducoff, co-founder and CEO at Edmit. “There are a variety of considerations. If a college is going to close, you’re going to have to transfer. Is your degree going to be worth less because of adverse brand consequences? That’s something you should probably consider.”

Controversy Over Regulators’ Metrics

The Department of Education has been evaluating colleges’ financial standing for decades in order to determine whether they are suitable to receive federal financial aid funds, known as Title IV funds.

In 1992, the Higher Education Act required Title IV participants for the first time to file an annual financial statement with the Education Department. It required the department to measure financial responsibility.

The exact evaluation has changed over time. In 1998, regulations created a methodology based on three ratios: primary reserve, equity and net income. They’re combined into a composite score to measure financial responsibility.

Today, the composite score runs from -1 to 3. Institutions scoring 1.5 or more are considered financially responsible. Those with scores of 1 to 1.5 are also considered responsible but in need of additional oversight, like cash monitoring. Those with a score of less than 1 are considered not financially responsible and can normally only participate in Title IV programs if they are subject to cash monitoring and post a letter of credit equal to at least 10 percent of the Title IV aid received in their most recent fiscal years.

In 2010, The Chronicle of Higher Education published a list of 319 degree-granting private institutions it labeled as failing the Education Department’s financial responsibility test over the three previous years. The National Association of Independent Colleges and Universities responded by saying that colleges around the country “found themselves the subject of unexpected, and often unfairly negative, media coverage of their financial situations.”

The number of institutions falling below the cutoff of 1.5 was “unusually large” in part because of the economic downturn, NAICU said. It also criticized the federal formula for counting endowment losses as actual losses instead of unrealized losses -- accounting categories that matter when evaluating a college’s financial operations.

Scores continued to raise questions. An examination of composite scores in 2014 showed that no Ivy League institutions posted perfect scores and that several, including Harvard and Yale Universities, scored 2.2 -- lower than the Hypnosis Motivation Institute in California.

Since then, new rules finalized this September addressed several accounting and reporting issues.

Today, NAICU isn’t necessarily against publishing the scores.

“We have never been opposed to publishing them per se,” NAICU’s vice president for public affairs, Pete Boyle, said in an email. “We are not against accurate transparency. We were upset because the scores were misleading and wrong, thus not excellent predictors. Plus, the publics are exempt so it paints an incomplete picture.”

Discussion over publishing the federal scores -- and the list of institutions on heightened cash monitoring that those scores feed into -- is also often tied up with talk about whether requirements for financially strained colleges are fair.

In 2016, St. Catharine College in Kentucky closed after finding itself on the stricter form of the heightened cash monitoring list, called HCM2. The college filed a federal lawsuit that February claiming the department was unlawfully withholding student financial aid funds, but it didn’t have the cash to survive while “the DOE’s rules changed nearly monthly,” leaders said.

College leaders also said the sanction hurt the college’s market position.

“Without the enrollment and with the DOE’s chokehold on our cash flow, the debt is simply not manageable,” board chairman John Turner said in a statement from the college. It also said the department’s sanction “irreparably damaged the college’s ability to attract students.”

More recently, the idea of publishing financial evaluations became a hot topic at the state level. After Mount Ida College suddenly collapsed in 2018, officials in Massachusetts started looking into new state requirements designed to prevent colleges from closing without warning students.

As they studied the issue last year, the question of who should be told what and when remained pertinent. The parent company of a for-profit college, Lincoln College of New England, told its investors in a May 15 filing with the U.S. Securities and Exchange Commission that Lincoln had been told by its accreditor to show cause why it should not be placed on probation for not meeting several standards, including one on institutional resources. Lincoln’s accreditor voted at the end of June 2018 to place the college on probation, but the accreditor didn't publicly announce the action until Aug. 23.

Accreditation experts said last year that they needed to balance transparency against the need for allowing colleges to appeal accreditors' decisions.

At the beginning of this year, Massachusetts regulators moved to screen all private nonprofit colleges' finances and warn students one and a half years before their colleges were at risk of closing. A Massachusetts Board of Higher Education plan proposed screening colleges using an indicator called the Teachout Viability Metric, which was developed by the consulting firm EY-Parthenon pro bono.

The metric would have used publicly reported data to estimate how well a college could teach-out currently enrolled students if necessary. It was only to be used as a screening tool to determine which colleges needed additional scrutiny from regulators. It wasn’t recommended as a way to determine if a college should have to close or post notice about its financial status.

Small-college advocates worried that the Massachusetts proposal would have imposed additional reporting requirements on institutions already stretched thin. They also feared their confidential financial information would be made public. But Massachusetts regulators have generally agreed with the need to keep confidential information from becoming public.

Multiple metrics were expected to be used to assess the financial viability of institutions, according to a spokeswoman for the Massachusetts Department of Higher Education. Legislation has been approved to address colleges at risk of closure in the state, with the governor there last week signing a bill that would clear the way for additional regulatory oversight.

When the state senate passed the bill last month, Massachusetts' commissioner of higher education, Carlos Santiago, pointed out that privacy of financial information was a key part of the legislation.

“I am particularly pleased to see the confidentiality clause that will safeguard the privacy of our financial discussions with independent institutions, and appreciate the clarity this legislation provides regarding financial screening,” Santiago said in a statement. “I look forward to seeing the final piece of legislation as we move forward on this critical agenda.”

Different constituencies in the state have been trying to find the best way to move forward, according to Chris Gabrieli, who is the chair of the Department of Higher Education’s board.

“My sense is that there is a deliberately paced but very real process playing out by which people in various places and roles are grappling with the hard questions,” he said in an emailed statement. “What are the most appropriate and thoughtful ways to do screening, both with regards to the utility of the metric and the necessary confidentiality and discreteness of the process?”

Since any financial scoring metric is imperfect, it will likely fail to capture the true prospects of some institutions, experts say. It's not the strongest or the weakest colleges and universities that policy makers and those who study higher ed worry about misjudging. It's the bottom part of the middle -- those colleges and universities that may be at risk but aren't clearly in crisis.

Is a Consumer Focus Different?

Financial ratings and lists of stressed colleges tend to carry more weight when they come from regulators or accreditors, several experts said. Not only can they be tied to state or federal support for a college or university, but tools used by governments can have more power in the public imagination than other rankings.

Still, consumer-focused rankings from third parties draw attention. Some colleges have even asked when financial grades published for several years by Forbes will be revived.

From 2013 to 2017, Forbes published a list of financial grades for private nonprofit colleges and universities. The grades were on a curve -- Forbes didn’t hand out any F’s -- and drew from IPEDS data. The grades were based on nine different components, including some used by the federal government, like the primary reserve ratio.

A new set of grades hasn’t been published in two years because the vice president and assistant managing editor in charge of the project, Matt Schifrin, has been busy with other priorities. But he’d like to publish a new set of grades in the future.

The grades drew some emails from college finance offices, Schifrin said. When they were first published, some were upset with poor ratings.

Higher ed associations also gave interviews criticizing them for various reasons: because they relied on the limited IPEDS database, because they didn’t make use of audited financial statements and saying they might even do more harm than good.

But some colleges were soon touting the fact that they earned high grades. Now, Schifrin gets emails from chief financial officers asking when a new list will be published.

“I can’t say there were huge objections,” Schifrin said. “It was more like we were putting out something that these college financial officers know. We were putting it out publicly.”

Those who know what to look for probably already have a good idea of the colleges and universities that are in financial trouble. It’s often institutions that are starting to spend more than they collect, said Robert Zemsky, professor at the University of Pennsylvania and chair of the Learning Alliance for Higher Education.

“It turns out this is not rocket science,” Zemsky said.

Colleges that are in trouble know it themselves, added Zemsky, who is an author of an upcoming book, The College Stress Test (Johns Hopkins University Press), on market stress affecting colleges and universities, due out in February 2020.

But it's hard to talk about financial stress in the current climate, and higher education hasn't developed a way to effectively discuss the roots of its problems, Zemsky said. Colleges and universities can shout all they want about how a college education is as important as it has ever been, but that's yet to allay the public’s reservations.

So a silence has evolved within higher education. Those who do talk about the sector's challenges are in the press, Zemsky said. Higher ed officials read the coverage, grumble about what it got wrong and go back to their jobs.

“The problem is we’re in a period of time when higher education feels itself increasingly the victim,” Zemsky said. “The victim of both public policy but also public discourse. As an enterprise, it doesn’t know how to handle that.”