The Conundrum of Financial Transparency in Higher Ed
By Bahar Akman Imboden
Massachusetts is making headlines nationally after Gov. Charlie Baker signed legislation requiring colleges and universities to be more transparent about their financial status. The Board of Higher Education is now tasked to develop an annual screening process to assess the financial condition of every college and university. While this is a step in the right direction, recent developments reveal the unfortunate situation we are in when it comes to financial transparency from colleges.
Consider this: a college advising company, Edmit, in collaboration with two economists and graduate students from Brandeis University’s International Business School, recently developed a transparency tool that uses an economic model to project the ‘burn rate’ of private colleges. That is, if a college were to continue on its current financial path, when would it have to shut its doors due to being unable to pay its bills?
But this morning the news was not about which colleges were deemed financially unstable by these new projections. Instead, news broke that after extensive pressure from colleges and their lawyers, Edmit has decided not to release their tool. Colleges argue that the tool is a gross misrepresentation and would lead to a self-fulfilling prophecy when students avoid colleges that are on the brink of failure, leading the colleges to go over the edge and fail to due to declining enrollment.
This exposes the conundrum we are in. We do not lack public data or methods to assess the financial stability of colleges, but colleges will block the public from accessing this information, fearing that it would further jeopardize their financial vulnerability, which they hope to weather and come out on top of. Equipped with lawyers and well-positioned to lobby for their interests, colleges will win this battle over transparency. Students, who are dispersed and don’t have an organized front to demand more information, will continue to be in the dark about the true financial viability of the school they choose to enroll.
Members of the Massachusetts Board of Higher Education have an important job ahead of them. If projections of college’s finances cannot be made available to the public, they ought to use the information in a timely matter to ensure that students do not suffer the consequences of financially unstable colleges. This is their moral obligation, as we witnessed first hand, with Mt Ida and Newbury Colleges closures recently, how devastating it can be for its students, its faculty, its staff, and for its alumni as well.
