Budget transparency bill for private colleges passes state senate, awaits governor's signature

Lawmakers in the Massachusetts State Houseunanimously approved the bill H. 4099, "An Act to Support Improved Financial Stability in Higher Education" on Oct. 2. The bill would require institutions of higher education to disclose financial reports to the public in an accessible manner, undergo financial screening and notify state officials of financial risks that could result in imminent closure. As of Nov. 6, the act was enacted by the state senate and waiting for the governor's signature. 

Under the bill, institutions determined to be at financial risk of closure would be required to develop a contingency plan that outlines arrangements for students, transfer of student records, information regarding the rights of student loan borrowers and more. The bill also requires the yearly publication of a financial report from the institution.

In addition, the bill would require that the school's governing body be taught about financial metrics used in institutions of higher education.

The proposed legislation coincides with state efforts to increase monitoring of financially struggling institutions in the wake of the recent closures and mergers of 18 colleges in Massachusetts.

The most recent closure of Mount Ida College in Newton, which had about 1,200 students, underscored some of the challenges that make small private colleges more dependent on tuition and fees and subsequently vulnerable to financial risks.

Many of the at-risk institutions have low endowments and enrollments compared to other elite, well-resourced institutions in the area.

“The fact that these institutions are experiencing this turbulence brings it to the attention of legislatures. Their constituents are affected and, in some cases, the municipalities they represent are affected by the instability,” State Representative Denise Provost said.

Michael Horn, author of multiple books on education and chair of the Education Quality Assurance Standard Board, a nonprofit that offers common standards for schools to verify the student outcomes they claim, said the bill offers a necessary consumer protection for students who are spending a lot of time and money on a degree.

“It could be a catastrophic mistake from a debt perspective to go to a school that’s not going to be around and that’s not going to give you the lift in earnings that you had hoped for,” Horn said.

Should the bill become law, the Massachusetts Board of Higher Education will be able to monitor schools to make sure that financial risks are assessed in advance so that students are able to make decisions and arrangements to transfer to another institution. Institutions found to be in noncompliance under the regulations could face penalties ranging from fines of $1,000 per day to forfeiting their degree-granting authority and state funding.

Provost said the penalties in place under the bill indicate how seriously the Commonwealth takes responsibilities around higher education.

“The bill is a plus for higher education because it puts in place a mechanism to give the state an early warning notification system when higher education institutions are in trouble so that orderly plans can be made,” Provost said.

The provisions outlined in the bill aim to increase transparency and provide protections to students and families.

In a statement written in the Boston Business Journal, RichardDoherty, president of the Association for Independent Colleges and Universities in Massachusetts, Tufts' trade and lobbying group on Beacon Hill, cautioned against such stringent laws.

“[I]f we want to protect one of the most vital drivers of this state’s economy, we need to move carefully and thoughtfully to be certain we don’t end up making things worse for colleges across this state working to restructure and reinvent themselves in a rapidly evolving higher education environment,” he said, pointing to the hundreds of thousands of people private colleges employ in Massachusetts.

However, Doherty added, "no one should begrudge efforts by regulators and policymakers to consider reinforcing the guardrails and guidelines aimed at avoiding a similar outcome in the event of future college closures."

State Representative Christine Barber explained that the benefit of the bill is the assurance that all students are protected and not taken by surprise.

“Higher education is the key, especially in Massachusetts, to getting jobs that pay well. Jobs that pay a living wage in Massachusetts typically require some kind of higher education,” Barber said.

Although the prospects of higher education hold a lot of promise, Barber said students do not always know what they are paying for, which is why it’s important to ensure that students feel confident they’re getting something out of the investment made.

Horn also stressed the importance of focusing the conversation on student outcomes — ensuring that institutions collect data and include audits to verify the value of what they’re claiming they offer students.

“It’s a question of whether the role of state government is to protect the institutions we have today or to protect the students. I think it’s the latter,” Horn said.