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[quote=Anonymous][quote=Anonymous]METHODOLOGY

Forbes College Financial Grades are designed to assess a private not-for-profit college’s operational soundness and balance sheet health using the following nine measures. Our data is derived from the Department of Education’s National Center For Educational Statistics. Only schools with more than 500 full-time students were included and public colleges were not graded. Colleges missing more than one of the 19 variables we look at were excluded from our list.

1. Endowment Assets Per FTE (17.5%): This measures schools’ endowment assets at year end per full-time equivalent student and is perhaps the most important determinant in a college’s long term financial health. Institutions with giant endowments can hire the best professors, embark on the most ambitious research projects and tend to have the most impressive facilities. MIT and Yale each have more than $2 million per student, and Princeton boasts $4.1 million per student. New York City’s Juilliard School has an endowment per student of more than $1.2 million. Private colleges generally need more than $335,000 per student to receive full credit in this category.

2. Primary Reserve Ratio (15%): This ratio broadly measures a college’s liquidity, grading how well its expendable assets could meet its annual expenses without straining its normal operations. Expendable assets are defined as total unrestricted net assets; plus temporarily restricted net assets; plus debt related to property, plant and equipment; minus property, plant and equipment net of accumulated depreciation; divided by total annual expenses. Grinnell College in Iowa, which scored an A with a primary reserve ratio of 16.8, could cover 16 years of expenses with its existing assets. (Grinnell also has a large endowment of more than $2.5 billion, thanks in part to investment advice from former trustee Warren Buffett.) By comparison, Belmont University in Tennessee, which scored a B-, has a ratio of 0.9 based on most recent government data. Any college with a ratio of at least 2.4 received full credit.

3. Viability Ratio (10%): This metric analyzes a college’s expendable assets divided by its total liabilities, similar to the primary reserve ratio’s measurement relative to annual expenses. Schools with a ratio of at least 2.55 received full credit, including Scripps College, Edgewood College and Fisk University. Some otherwise financially stellar colleges with high total liabilities relative to expendable assets, like the University of Pennsylvania, received lower scores.

4. Core Operating Margin (10%): This measures whether tuition, donations and investment revenues cover a college’s educational expenses by subtracting its core expenses from its core revenues and dividing the difference by its core revenues. Brigham Young University, which scored an A+, had an operating margin of 99% versus Stanford University, Williams College and Pomona College which had negative operating margins in fiscal 2022.

5. Tuition As A Percentage of Core Revenues (15%): Diversified revenue streams make any organization more financially secure, and colleges are no different. Schools that get the lion’s share of their revenue from tuition are more vulnerable to enrollment declines and price competition. This is the case for the vast majority of private colleges we rank. By contrast, tuition accounts for less than 15% of revenues at schools like Johns Hopkins University, Stanford, Saint Augustine’s University, Brigham Young University, and Hillsdale College.

6. Return On Assets (10%): This metric divides a college’s change in net assets during the year by its assets at the beginning of the year. Because the stock market performance was dismal in 2022 when the S&P 500 was down 18%, results were substantially worse across the board for most schools. In fact, full credit was awarded to only 33 colleges (compared with last year’s 266) that scored at least a 22.5% return, the measure we have used since the inception of our ranking in 2013. Catawba College in Salisbury, North Carolina saw its net assets grow by 97% in fiscal 2022 thanks largely to two large gifts—one worth $200 million and another for $42 million—from anonymous donors. The average return for the schools on our list in fiscal 2022 was -1.06%.

7. Admissions Yield (7.5%): Any college would rather be an applicant’s first choice than their safety school. Admissions yield measures the percentage of accepted students who choose to attend, and a higher number is a sign of a healthy enrollment. While top Ivy League colleges tend to have yields in the 70% range, widely respected second-choice schools like Philadelphia’s Drexel University or Chicago’s Loyola University tend to have admissions yields of less than 10%. A few surprising small colleges like Catholic school College of Saint Mary in Nebraska and the aeronautics and computer science-focused Hallmark University in Texas have yields over 80%. Any school with a yield of at least 51% received full credit.

8. Percent Of Freshmen Getting Grant Aid (7.5%): Colleges that hand out scholarships and grants to a large chunk of their incoming freshmen may appear to be wealthy and generous, but an unusually high percentage in this category can often be more indicative of desperation to entice students to enroll. The “discounts” often in the form of merit scholarships significantly reduce the actual cost of most schools outside of the top 50, which don’t engage in as much discounting. Examples of colleges that offer grants to more than 90% of their incoming freshmen include, Wheaton College in Illinois, Catholic University in Washington, DC, and Minnesota’s University of St. Thomas. Any college where the statistic is less than 40%, like Bates College (36%), receives full credit.

9. Instruction Expenses Per FTE (7.5%): This measures how much schools actually spend on educating each student. A higher amount reflects a college able to invest in its core purpose. F[b]or the third year in a row, Washington University in St. Louis wins top honors with $142,185 spent per student, [/b]with Stanford coming in second at $130,671 per student. Meanwhile the largest Ivy League school in terms of headcount, Cornell University with more than 25,000 full-time students, is spending $32,766 per student on instruction annually. New York City’s Pace University spends $10,750 per student and Colorado Christian University spends about $3,600 per student. Full credit is given to any school spending at least $46,000 per student on instruction expenses.[/quote]

Proud WashU parent! [/quote]

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