There is a lot of data available to families during the college search process - student to faculty ratios, acceptance rates, graduation rates, freshmen retention percentages -- and the list goes on. Although the relevance of these statistics is a topic for a separate blog post, I want to focus on data that can be difficult to find but important to seek out. Families looking ahead to the cost of four years of tuition recognize that educating their children is a large investment. Yet, in many cases, important financial information of the underlying institution to which you are writing large tuition checks isn’t included in the glossy brochures and marketing presentations. You wouldn’t buy stock in a company that was fiscally irresponsible, nor should you risk investing in an educational institution that mismanages its money. After all, a degree from a college that was insolvent and had to close its doors has little value. So, when colleges talk about all of the new construction happening on campus, I think it is fair to ask about their long-term bond rating. While the credit agencies aren’t perfect at predicting financial troubles, they at least give us a sense of a college’s financial health. In addition, the federal government releases a financial responsibility scorecard every spring that assesses private colleges’ financial strength. Although the purpose of this is to protect federal student loan money from disbursement to students at colleges that will ultimately close their doors, this tool can also be helpful to parents in gauging the overall financial stability of private colleges. If you do any research on the federal financial responsibly scorecard, you will soon realize that the metrics used and their predictive nature is certainly flawed. However, it is better than nothing. What about the public universities that aren’t assessed under the federal scorecard? The federal government assumes that the state governments keep tabs on the universities in their state, so they are excluded.
There are many interesting shifts in higher education to monitor. Fewer students will be applying to college in the near future, several states are struggling with budget deficits which are impacting budgets at state universities, and many colleges are becoming heavily tuition reliant depending on the health of their endowments. This is not lost on the colleges and universities that, in many cases, are preparing for the changing landscape. The reality is most will be just fine. At the same time, I think it is an important time to do your research, ask appropriate questions, and choose colleges wisely. After all, it is a significant investment.