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An institution with a June 30 year-end should ensure a check of their financial responsibility is performed before the month of June is over. Once an institution is past its year-end, very limited options are available. At this point in time, the Department of Education (ED) has not waived any financial responsibility standards as a result of the Coronavirus.
Institutions should ensure these items have been reviewed and vetted:
- Compute a composite score ratio using projected numbers for the entire fiscal year. Ensure the 2019 Borrower Defense to Repayment (BDTR) regulations are reviewed as these regulations changed the composite score ratio components for the treatment of debt and leases, if applicable. New components were defined related to pre and post implementation qualified debt and pre and post implementation leases. Also, the BDTR regulations changed the treatment of investment gains and losses, and pension obligations. The U.S. Department of Education issued a Financial Responsibility Questions and Answers on April 9, 2020 which provided further clarifications to these regulations.
- Review compliance with debt covenants and, if failure is anticipated, initiate conversations with your creditor in regard to waivers or restructurings.
- Review any financial ratios or covenants as required by your respective accrediting body.
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