The landscape is rapidly shifting for America’s colleges and universities, many of which were already on shaky ground. Forbes analyzed the financial health of 868 private colleges. Below are the details of our methodology.
By Emma Whitford and Matt Schifrin , Forbes Staff
Fifty-one colleges earned an A+ on this year’s Forbes college financial grades, but 381 scored C or worse. getty
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 (Click here for the full ranking). 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. Some colleges failing to provide the government with the financial variables we use for analysis, like Arkansas Baptist College, San Francisco’s Golden Gate University, and The School of the Art Institute of Chicago, were excluded from our grading.
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. Princeton, which only earned a B+ this year because of a large investment loss, boasts $3.7 million in endowment per student. Dartmouth, Pomona College and Amherst College each have an endowment per student of more than $1 million. Boston University, graded A, with more than 31,000 students, has a mere $83,539 in endowment assets per student. Private colleges generally need more than $350,000 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. Rice University in Texas, which scored an A+ with a primary reserve ratio of 8.6, could cover more than eight years of expenses with its existing assets. By comparison, The New School in New York, which scored a C+, has a primary reserve ratio of 0.75 based on the 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 2.56 received full credit, including Holland, Michigan’s Hope College, a Christian liberal arts college with 3,140 undergraduates, The Juilliard School and Minneapolis’ Macalester College. 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. Tiny Berea College in Kentucky, which scored an A+, had an operating margin of 103% versus Davidson College, Wellesley College and Yale University which had negative operating margins in fiscal 2023. McPherson College, a small college in Kentucky, scored an A+ this year after receiving a $500 million endowment gift in fiscal 2023 and had an outlier operating margin of 2,900%
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 the California Institute of Technology, Hillsdale College, Johns Hopkins University and Washington University in St Louis. Princeton, whose grade dropped to B+, is normally a standout in this category, but in 2023 its core revenues suffered a $555 million investment loss, increasing the percentage accounted for by tuition to 79%.
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. Perfect scores were awarded to 25 colleges that had return-on-assets exceeding the S&P 500 total return for fiscal 2023 of 18.3%. Half credit was given to any college earning an ROA of about 1%. McPherson College in Kentucky saw its net ROA soar in 2023 thanks to an asset boost in the form of a $500 million endowment gift in fiscal 2023. The average return, after excluding McPherson, for all of the schools on our list was 2%.
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, 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 that tend to be “self-selecting” like Christian Emmanuel University in Georgia 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 St. Olaf College in Minnesota, Drury University in Missouri and Howard University in Washington, D.C. Any college where the statistic is less than 40%, like Babson College in Massachusetts (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. For the fourth year in a row, Washington University in St. Louis wins top honors with $161,193 spent per student, with Stanford coming in second at $140,522 per student. Meanwhile the largest Ivy League school in terms of headcount, Cornell University, with more than 25,000 full-time students, is spending $31,572 per student on instruction annually. The Rose-Hulman Institute of Technology spends $19,767 per student and Dillard University spends $7,528 per student. Full credit is given to any school spending at least $42,700 per student on instruction expenses annually.
Click here for the 2025 financial grades for 868 private colleges.
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