The Education Department released today a list of the 556 colleges where it has stepped up oversight due to potentially serious financial and compliance issues. The department had previously kept secret the names of the schools on what it calls "heightened cash monitoring" status, saying it worried releasing the data could lead to "competitive injury" for the schools. More than half of the schools on the list released today are for-profit institutions.
The vast majority of universities, public, private and for-profit alike, are able to draw federal financial aid funding from the government at will, with limited federal oversight. But the Education Department's heightened cash monitoring status places restrictions on schools' access to that federal money, requiring them to disburse student aid funds before requesting reimbursement by the government.
In its strictest form, called "Heightened Cash Monitoring 2," the Education Department requires universities to carefully document their expenses before the schools can be reimbursed, which can severely limit cash flow. Sixty-nine of the schools on the department's list are now subject to the stricter levels of monitoring.
Schools can be subjected to increased oversight for a variety of reasons, said department Under Secretary Ted Mitchell in a press call. "It might be because we have serious concerns about an institution or its administrative capacity," Mitchell said, but could also be because of more minor compliance issues, such as late audits. Other reasons for monitoring include accreditation issues, poor financial health scores, and high default rates.
"Heightened Cash Monitoring is not necessarily a red flag to students and taxpayers, but it can serve as a caution light," Mitchell wrote in a blog post.
The schools in the department's list represent a wide variety of institutions, though more than half are for-profits like ITT Technical Institute, Everest College, and the Art Institutes. Many of the schools under the stricter HCM2 are beauty and other trade schools, but they also include yeshivas, the Joffrey Ballet School, and the University of Toronto.
Twenty-three schools on the department's list are under investigation because of "severe findings" in a program review. The department redacted the names of those schools, saying it was worried that revealing them would interfere in the investigations. While department data appears to show that the majority of schools under investigation are for-profit schools, several were private and public nonprofits.
Publicly traded for-profit schools must disclose when they are placed under heightened cash monitoring. Last June, the for-profit giant Corinthian Colleges announced that the Education Department had not only stepped up financial oversight through heightened cash monitoring, but was taking an additional step to delay payouts to the school by 21 days after it missed reporting deadlines. It was that move to temporarily cut off access to federal money that eventually sent Corinthian, which had already been short on cash, teetering towards bankruptcy; the company is now in the process of selling off its schools.
The full list of schools is available here.