Every year, the Department of Education (DOE) scores the financial health of colleges and universities that issue financial aid under the auspices of Title IV funds. The problem is that tests are computed differently across regions, within regions, and by the same person within a region. Why does this matter? If the DOE is below the required score (safety zone lower boundary score), two things may occur:
- The institution will have to purchase a letter of credit, if the score is below the safety zone. These letters are not inexpensive, and they can adversely affect credit ratings.
- If the score is into a danger zone, then DOE has the authority to terminate an institution’s access to federal aid. At this time, there is no evidence that they have revoked access to federal aid or are considering such a proclamation.
For more information on problems with scoring the financial health tests, see the article in the Chronicle of Higher Education: Education Dept. Faces Renewed Criticism over Colleges Financial Health Scores by Goldie Blumenstyk; July 1, 2013.