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Advisory Report

NACUBO’s advisory 19-04, published in October 2019, explains new financial responsibility requirements for private nonprofit institutions and discretionary and non-discretionary triggering events, which affect both public and nonprofit institutions. The new rules, published in September 2019, require that all institutions that receive Title IV aid notify ED when certain triggering events occur.

Financial Responsibility Standards Overview

The Department of Education's financial responsibility standards (Subpart L of 34 CFR 668) are intended to ensure that institutions that participate in the federal financial assistance programs are able to meet their financial obligations and provide the resources necessary to offer their educational programs and comply with ED rules.

The Obama-era borrower defense rules, which were created in response to the sudden closure of Corinthian Colleges, rely on financial responsibility standards as a basis for assessment. In addition to other requirements, nonprofit and for-profit schools are subject to calculation of a composite score made up of three financial ratios. Institutions that do not demonstrate passing scores are subject to additional oversight and may be required to provide surety to ED. To learn more about the Obama-era borrower defense rules, visit NACUBO's Borrower Defense page.

 

News

 

Report of the NAICU Financial Responsibility Task Force

For a decade, NACUBO and the National Association of Independent Colleges and Universities (NAICU) have been urging ED to correct its treatment of certain elements in the ratios used to calculate the composite score. The Report of the NAICU Financial Responsibility Task Force, published in 2012, details the associations' concerns and recommendations.

Download Report

Cover of Report of the NAICU Financial Responsibility Task Force

NACUBO Resources

NACUBO Advisory Report 18-05, Financial Responsibility Standards (Updated July 2019)

Excel worksheet, designed to stress test ratios and composite scores under the 2016 Borrower Defense rules (October 2018)

Financial Responsibility and Borrower Defense Timeline (updated September 2019)

NACUBO Advisory Report 98-1, Title IV Financial Responsibility Standards Revised (January 13, 1998), a resource for nonprofit institutions

Sample Letter from ED to an institution with composite score under 1 detailing letter of credit alternatives

 

 Department of Education Resources

Title IV Financial Responsibility Standards, final rule, Federal Register, November 25, 1997, pp. 62829 - 62887
Note: Appendix G provides details on calculation of the composite score for nonprofit institutions, beginning on page 62885.

2017-18 Student Financial Aid Handbook, Vol 2, Chapter 4, Audits, Standards, Limitations, and Cohort Default Rates 
Note: Discussion of financial responsibility standards begins on page 2-89

ED Dear Colleague Letter GEN-03-08, Use of Long-Term Debt in Financial Responsibility Calculation (July 2003)

 

Related Pages

To visit pages with related content, click below:

Borrower Defense   ED Regulations   ED Archives

Contact

Liz Clark

Vice President, Policy and Research

202.861.2553

Contact

Sue Menditto

Senior Director, Accounting Policy

202.861.2542


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