The end of the fiscal year usually isn't a momentous occasion for colleges. But this June 30 could be a day of reckoning many never expected. Colleges borrowed billions of dollars over the past decade to improve facilities and fulfill their ambitions. Now the consequences may be about to blow up in their finances. The author reports on how colleges rush to avert financial fallout after borrowing billions and are now facing a complex problem that arises from a simple scenario: The debt load for many colleges has gone up, but the value of their assets has plunged. On top of that, some of the debt that they structured to protect themselves from rising interest rates has now become a financial liability. When liabilities grow and assets shrink, even institutions now able to manage their debt payments could find themselves in violation of covenants in their bonds and bank loans. While it is unlikely that those breaches will result in huge financial upheavals, they could prompt some bondholders to demand immediate repayment on part or all of an institution's bonds--no small cost considering that even small colleges now carry tens or hundreds of millions of dollars in debt. The demands of meeting the covenant conditions could force layoffs or other cutbacks, and in extreme cases, shut some colleges down. Covenant problems used to be isolated cases. But with so many more colleges carrying debt, and with so many new debt instruments in use, such cases could start appearing far more frequently. Few institutions facing covenant problems or other debt pressures are willing to go public with their dilemmas. Leaders of higher-education associations who say they are aware of member institutions' scrambling to cut costs or land a big gift to avoid violating a bond covenant are reluctant to name names.