The New England higher education accreditor announced Thursday that it will pilot a new early warning dashboard to gauge the financial health of colleges and help avoid sudden school closures.
All 72 private colleges and universities in Massachusetts, from Hampshire College to Harvard University, will participate in the one-year pilot that will probably launch in December, according to the New England Commission of Higher Education. Two for-profit Massachusetts schools will also participate.
Since the abrupt collapse of Mount Ida College last year and the closings of several other small colleges in New England, the commission has been under increased pressure to more closely monitor the financial well-being of these institutions.
The dashboard should help, said Barbara E. Brittingham, the commission’s president.
“This is a screening device on quantitative measures that can lead to a more qualitative look,” she said. “It will be good for students and families.”
The accreditor already conducts an annual review of financially fragile institutions, but the dashboard will include all the private colleges and universities, and it incorporates more data. It will use budgetary ratios similar to what bond rating companies use to evaluate colleges.
The dashboard will consider factors such as an institution’s cash flow, how much of its endowment is tied up for specific uses, enrollment trends, and whether it has sufficient assets that can quickly be turned into cash, according to the commission.
The accreditor worked with chief financial officers from Boston-area colleges and universities along with a former higher education expert at Moody’s Investors Services, the bond rating company, to develop the metrics.
“We believe these measures will ultimately lead to better outcomes for students,” said Richard Hisey, the chief financial officer at the Berklee College of Music, in a statement.
The state Department of Higher Education has also been working on new regulations that will help officials keep tabs on private colleges’ finances. The new system is designed to alert officials sooner to schools that are potentially on the verge of collapse. Governor Charlie Baker has also filed legislation to the same effect.
Several small liberal arts colleges throughout New England are struggling financially as they face enrollment declines and fierce competition for students. This past year, several announced plans to close. Hampshire College in Western Massachusetts announced it was looking for a merger partner to help stabilize its long-term finances, although the school’s new leaders now say they hope to remain independent.
But Mount Ida, which sold its property to the University of Massachusetts Amherst and shut down in 2018 after offering little notice to students, alarmed regulators and legislators.
Before it closed, officials from the accrediting agency had conducted a routine evaluation of Mount Ida — part of a reaccreditation process that colleges must undergo each decade — and found several serious budgetary and academic concerns. But before accreditors could talk to college officials about their findings, Mount Ida announced that it would shut down.
It takes a buildup of problems over years before a college collapses, said Virginia Sapiro, a professor of political science at Boston University who is writing a book on the history of higher education in the United States, including a section on school closures.
But accreditors should have an alert system so they are aware when schools are tipping in the wrong direction, she said.
“The new policy is exactly what should happen: a trigger for institutions showing signs of severe financial trouble,” Sapiro said. “Almost no institution becomes financially unstable suddenly, although something may tip one over the edge if it is already vulnerable.”
The accrediting commission is also considering new policies on the financial responsibilities of college governing boards and additional training for board members so they can provide better oversight.
Colleges are supportive of the accreditor’s new dashboard, said Richard Doherty, the president of the Association of Independent Colleges and Universities, a trade group that represents the state’s private institutions.
“It’s a good step forward,” Doherty said.
If the pilot is successful, the commission will consider expanding the number of colleges across New England that will undergo the extra monitoring.