Private Institutions Fail Financial-Responsibility Test

In The Chronicle of Higher Education yesterday, 150 non-profit colleges were reported to have failed the financial-responsibility test. The what? That's what I thought. The Financial-Responsibility Test examines the financial health of an institution, I guess...well, according to the article. The test measures cash flow, deficits, debts, net worth, and budget surplus. The colleges will then have to submit a letter of credit to continue their eligibility in participating in financial aid programs. So my understanding is that the institutions will have to submit a letter that will represent their accountability in the financial aid programs.

This was news to me, however, as I did more research, this issue has been occurring during the previous years and colleges, in the hundreds, have been failing such a test. Basically, institutions--private and public--have been ailing in their financial health status. The financial-responsibility test is stated to protect the students from a failing institutions, meaning that students are to receive quality education in any institution but should be made aware of how their institution is doing financially to meet this need of quality education. But towards the end of the article, students are also notified not to discredit or rule out institutions who have been reported to fail the test because these institutions are not in danger of closing out. I wonder what students will do if they do find out that their institution is going through a financial crisis. Do most of these students even considering such issues as their colleges failing the test? Are they even aware that there is such a test? I didn't even know until I read this article. I think that those who are aware of such an issue will remain attending, but maybe will understand that it may be more challenging to receive federal aid from the institutions. Will an institutions failure in financing operating of the institution affect how the students will receive aid? Maybe. Policies regarding who receives aid and how will probably be re-evaluated and changed. It seems the issue just rolls down from the top and the students end up with most of the consequences to suffer from.