Location: Madison County, Indiana
My school is on some real financial hard times right now and they have been for a long time. Everyone knows this ship is sinking, but the school continues to admit more students and close departments in hopes that it will fix things. For a little more detail about this, it is a private, christian, non-profit college.
My question is this: if the school admits students to a 4 year program, knowing that they will likely shut down before the 4 years have passed without disclosing that to the students, could the students sue the school? I’m not sure what the exact rules regarding this are, but I’m curious because I don’t know exactly how it should be classified, but it feels like some kind of fraud to do this. On top of that, it really doesn’t seem fair to the students to admit them and take their money under the pretense of a 4 year degree that the school knows won’t happen. What damages could the students claim? Could they claim the money they paid the school? could they claim the value of lost scholarships or grants? could they claim the cost of moving to a different school?
Comments
Do you pay all 4 years upfront? Are the credits transferable?
The credit should be transferable. My friend went to a school that shut down, and all of the units were able to be transferred to the new school. So my friend wasn’t really out anything.
No. They probably couldn’t. It comes up in all kinds of contexts: does a failing business owe some duty of disclosure. They don’t. Forcing them to would hasten their death. And they probably actually don’t know. They think these next steps are what rights the ship.
You shouldn’t have any real loss when you take your transfer credits to the next school.
If they’ve financially failed suing probably doesn’t accomplish much.
I think it would be hard to prove that they knew they were going to be shutting down. It may end up happening, but the administration can just keep saying that they had a plan to turn things around and it just didn’t work. Part of that plan may be to enroll more students because without students, they’re definitely going to shut down. Now as others have also said, most of your credits should transfer normally, if not all of them if the school does shut down. There were also rules about student loans being forgiven, but not sure if they apply to non profit schools or if they’re even still around with the current administration.
When an accredited college or university shuts down, they are required to have a teach-out plan that gives current students the opportunity to complete their degrees, either by ending new admissions but staying open for 3-4 years, or through agreements with other institutions to allow their students to transfer and complete their degrees. Waiver of standard transfer application fees is typically a part of such agreements, and they also usually try to keep students’ out-of-pocket costs from being more than at the closing institution.
Students would not be eligible for a refund of any tuition paid for semesters that were completed. Federal student loans can sometimes be forgiven if your school shuts down.
Another scenario is that a financially struggling school will merge with another school (that is perhaps also struggling), in which case students remain admitted to the merged school.
If a college closes without a teach-out plan, then they immediately lose their accreditation. This happened a couple years ago at University of the Arts in Philadelphia. Students were refunded tuition for any tuition they’d paid for upcoming classes.
The problem with suing a college that is shutting down is that the institution is almost certainly in bankruptcy, and so any judgement for damages is just going on the list of the college’s debts, and may or may not ever be paid. If a school closes in a manner that causes their students to have recoverable damages, they’re likely in such a bad financial position that getting a judgment paid isn’t realistic.
This happened in Hickory Ky. They kept admitting students, added a law school while waiting for certification and just kept admitting students knowing that they were sinking. They abruptly closed the doors in 2014 and filed for bankruptcy. They were forced to stop pursuing outstanding balances from their students.
It was called Mid-Continent University if you want to look it up