Marquette’s financial responsibility score decreases

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Marquette’s financial responsibility score decreases

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Marquette’s “financial responsibility” score decreased 0.4 points from its perfect score of a 3.0 last year, according to the U.S. Department of Education.

The department issues an annual financial responsibility test to all degree-granting private universities, grading them on a scale from a negative 1.0 to a positive 3.0, based on three ratios: their primary reserve, equity and net income, according to its Federal Student Aid website.

Universities are considered to “pass” the test if they receive a grade from 1.5 to 3.0. Universities with a grade between positive 1.0 and negative 1.0 are “failing,” and are required by the U.S. government to post a letter of credit in order to keep their doors open. A score between a positive 1.0 and positive 1.4 are also subject to additional government oversight, but are still considered to be passing.

According to the Chronicle of Higher Education, 168 private universities failed the test for the 2012 fiscal year, 18 more than the year before.

Despite Marquette’s drop in score, Noel Stuiber, the director of financial research and analysis, said the school is doing just fine fiscally.

“At its current measurement of 2.6 out of a maximum of 3.0, Marquette is not near any financial danger zone,” Stuiber said in an email. “In fact, we diligently manage this issue in knowing that the revenue for operations are generated mainly from our students and their families.”

If the U.S. Department of Education’s score is a direct indicator of fiscal health, this “financial danger zone” is a very real concern for many universities. Schools like the University of Miami, which received a passing score last year but failed this year, are now required to post letters of credit to stay open – which could actually accelerate the financial damage to the school, according to the Chronicle of Higher Education.

The test is controversial in the academic community due to its tendency to drastically change grades from one year to the next. Bethel University in Minnesota challenged its score in 2011, which was a 0.4, and rose to a 2.1 by the next year.

Jay Barnes, the president of Bethel University, told The Chronicle of Higher Education that if a school’s score changes so significantly, it “tells you that something is screwy.”

Stuiber, on the other hand, does not see anything wrong with the test.

“The financial responsibility test is a valid financial metric used by the U.S. Department of Education that currently portrays Marquette in a positive light,” he said. “We consider it valid because it measures the institution’s ability to cover its operating expenses, build its asset base and sustain operational integrity.”

Stuiber said the financial responsibility test is not the only public measure of the university’s fiscal health. Moody’s Investors Service granted Marquette an A2 bond credit rating since it began evaluating the university.

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