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AVE MARIA — The soon-to-be-local Ave Maria School of Law was one of 114 private colleges nationwide to fail a federal financial responsibility test this year, according to a report last week in a national higher education newspaper.
But the law school said its inclusion on a U.S. Department of Education list of schools with low financial ratings, “represents no change in our fiscal health and should not be cause for concern.”
The report, in the Chronicle of Higher Education, lists the Ave Maria School of Law as the sixth worst in the country based on the department’s metrics of financial responsibility. Ave Maria is also the only law school on the list.
Schools with scores as low as Ave Maria’s are subject to extra federal monitoring over their use of financial aid funds. They also must post a letter of credit equal to at least 10 percent of its previous year’s federal financial aid awards as a guarantee to the department, an education department spokeswoman said.
Further, the Chronicle reported, failing the department’s test, “can be an indicator that a college is in danger of not surviving.”
An education department spokeswoman said the department is “always concerned” when a school doesn’t meet its financial metrics, but that a failing score, “generally presents little additional risk to students or to federal funds as these schools seldom close.”
The department’s metrics take into account a school’s primary reserves, equity, and net income ratios, and are derived from the school’s most recent audited financial statement.
Ave Maria reported a $2.9 million deficit in its most recent audit, which covered the year ending June 30, 2008.
In a statement about the Chronicle report, the 10-year-old law school said its low asset-to-debt ratio was “typical of recently founded institutions.”
Ave Maria’s audit also references a $672,346 letter of credit posted through the end of this month, which, if needed, would reimburse the Department of Education for Ave Maria’s loan guarantees. It’s unclear if that letter of credit was a prior requirement from the Department of Education or if the school will be posting a new letter of credit to comply with a new mandate.
In its statement, the law school added that it expected its financial situation to improve, citing an increase in tuition revenue, endowment and better fundraising opportunities at its new North Naples location.
Ave Maria School of Law founder and Domino’s Pizza magnate Tom Monaghan also has committed to cover the school’s operating deficits until 2017. Ave Maria will move from Ann Arbor, Mich. to become Southwest Florida’s first law school on July 1.
Ave Maria received some positive financial news this week. The Lansing, Mich.-based Cooley Law School announced it would occupy Ave Maria’s former location to open an Ann Arbor campus.
Cooley President and Dean Don LeDuc said Cooley and Ave Maria agreed to a three-year lease for Cooley to use the facility with an option to purchase. Ave Maria’s last audit valued the facility at $16.5 million.
LeDuc declined to release further terms of the deal and the law school’s statement did not reveal any terms.
The Ave Maria School of Law is not institutionally connected with Ave Maria University, the private school in the Catholic tradition also founded by Monaghan, nor the eastern Collier County town co-developed by him. Monaghan is chancellor and sits on Ave Maria University’s board, and is chairman of the law school’s board. Also, the law school is leasing its North Naples campus, located in the Vineyards community, from the university.
Ave Maria University was not among the schools failing the Department of Education’s financial responsibility test, according to the Chronicle.