Steve Rhode performed a valuable public service last month when he published the U.S. Department of Education’s most recent Heightened Cash Monitoring List. This is DOE’s list of schools that have various financial concerns, including accreditation problems or missing audits, as well as schools that are on financially shaky ground.
DOE does not make the list easy to review. I could discern no organizational pattern. Public schools, private nonprofits, proprietary schools, and foreign schools are all listed together. In total, there are more than 500 schools on the list.
Not surprisingly, more than half the schools with financial concerns are proprietary schools–a total of 275 for-profit institutions. A good share of these schools are devoted to hairstyling or beauty. Forty-six schools on DOE’s HCM list have the word Beauty or Cosmetology in their names, and there are three massage schools on the list.
The list also includes a large number of private, nonprofit colleges or universities: 128 schools in all. A fair number have religious affiliations. Seven schools on the list have the word Baptist in their name, and three school names include the word Wesleyan, indicating a Methodist affiliation. Twelve colleges have the word Christian in their titles, and there were several other schools with names suggesting a religious connection: Bethel, Bethany, Bible, Seminary, etc.
DOE listed 35 foreign colleges and universities on its Heightened Cash Monitoring List. You might find it surprising that the federal government is funding foreign study at the same time the national parks are closed, but it does. Among the 35 foreign schools with various financial concerns are Hebrew University of Jerusalem, Universiteit Van Amsterdam in the Netherlands, University of Aukland in New Zealand, Centro De Estudios Universitarios Xochicalco in Mexico; and Poznan University of Medical Sciences in Poland.
DOE’s list includes a category of schools with high student-loan default rates. Schools with a three-year default rate of 40 percent and schools that have a three-year default rate of at least 30 percent for three years are ineligible for federal student-aid money.
Remarkably, none of the 500 plus schools on DOE’s HCM list were flagged for having a high student-loan default rate. How could that be when Secretary of Education Betsy DeVos herself said that only 24 percent of student borrowers were paying down the principal and interest on their loans?
In my view, DOE’s HCM list underreports the number of American colleges and schools that are in financial trouble. Nevertheless, the list is useful.
First, the list confirms that a large number of small, private nonprofit colleges are in trouble, including many with religious ties.
Second, we can see from the list that the largest share of financially troubled schools are for-profit institutions.
Finally, the list is a reminder that the U.S. Department of Education is loaning money for Americans to go to school overseas, which seems insane given the excess capacity in American higher education.
Of course, not all schools on DOE’s HCM list are experiencing serious financial problems. Some are on the list due to accrediting issues, inadequate administrative support, or audit irregularities. Nevertheless, all postsecondary students should check the list to see if their school is on it. And parents who are helping their children decide where to go to college should also check the list. No one wants to enroll in a college that may close before the student graduates.