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Update

School Closures and Student Harms

In recent years, colleges, universities and vocational schools have been closing at historically high rates. These closures have been driven by an array of factors including demographic fluctuations, regulatory changes, increased scrutiny over consumer protections, financial pressures, technological developments, and shifts in student desires and behavior. Regardless of the cause, without adequate safety measures and advance planning, an institutional closure is likely to yield dramatic, negative consequences for students. When a closure comes precipitously, i.e., without warning to students, accreditors, and regulators, students can be left stranded with their academic and financial future upended. Accreditors can and therefore must use their powers to require schools to adopt policies and procedures that will help identify and allay the risk of closure, but also adopt plans to mitigate, if not eliminate, many of the consequences in the event of closure.

Bottom Line

The trends driving recent school closures do not appear to be going away, and accreditors have a responsibility to prepare for future failures. Working in concert with state and federal regulators, there is a real opportunity to help affected students navigate these disruptions with less harm to their finances and academic future.

Read Our Report

School Closures and Student Harms: Recommendations for Accreditors

 

Background

In the past five years more than 1,000 college campuses have closed, displacing nearly 500,000 students. Those failures include the well-chronicled closures of Corinthian Colleges and ITT, as well as smaller schools such as Mt. Ida College and Dowling College. At a macro level, overall attendance and revenue has been declining since a peak nearly a decade ago. A total of $142 billion in Title IV funds went to schools in the 2010-2011 school year, compared to $119 billion in 2017-2018. That decline has been even more dramatic in the for-profit sector, falling from $32.6 billion to $14.8 billion over the same period.

Demographics play a role as well, with declining populations putting pressure on schools in regions such as New England and the Midwest. For less selective schools in particular, students are less likely to attend a school far from home, so regional population trends weigh heavily on local institutions. The proximate causes of closures are just as diverse. Some schools close their doors suddenly when they lose Title IV funds eligibility, as in the case of the Education Corporation of America, which closed one day after the Accrediting Council of Independent Colleges and Schools (ACICS) withdrew its accredited status. Others fail more slowly, such as the 41 campuses owned by Dream Center Education Holdings, which had been kept in limbo for months while the company searched for a buyer. The final straw for a school could also be an enforcement action or court judgment, withdrawal of investor support, or any number of unforeseen events.

For perhaps obvious reasons, a sudden institutional closure poses more risks for students than a gradual, intentional one. With time to prepare, accreditors and regulators can help ensure students have a soft landing. Students will have time to thoughtfully consider future academic plans, impact on family and work situations, transportation considerations, and the impact on debt and finances. Any closure, however, is bound to be a significant disruption for the students whose education is affected.

 

Our Recommendations

  • Require robust teach-out agreements
    In the chaotic atmosphere that may precede an institution’s closure, the mere existence of a plan is unlikely to suffice. It is one thing to have a document that contemplates steps that may be taken in the event of a closure, but it is entirely different, and better, to have signed agreements with other entities about the steps that will be taken. For this reason, wherever possible, accreditors should require signed teach-out agreements as part of their teach-out plan process.
  • Ensure transcript availability
    For institutions that cease operations entirely, systems must be established to ensure that students maintain access to transcripts and other educational records. In the chaos of a haphazard or sudden closure, the danger is compounded by the possibility that students may even receive incorrect transcripts on plain paper, with no opportunity to fix errors with a defunct registrar.
  • Provide advance warning
    The amount of advance warning possible will vary by school and circumstance, but from a student protection perspective, accreditors should push for as much transparency as possible. Recognizing that warnings of closure can become a self-fulfilling prophecy, students still deserve to have as much advance notice as possible. Accreditors should make sure that, when they subject schools to heightened measures to mitigate potential harm from a closure, they are transparent with students about the risks that may be forthcoming. Accreditors must remember that a student on the verge of completion may assess risk differently than a student who is signing an enrollment agreement for the first time.
  • Monitor Policies and Practices Regarding Closed School Discharge
    Accreditors must commit to ensuring that students are truly protected by regulations that entitle them to closed school discharges, and must combat loopholes that have led students to not receive discharges in some cases. First, accrediting agencies can and should take steps to limit a closing school’s ability to continue to provide accredited instruction, unless an institution is willing to guarantee that all students will get the benefit of a closed school discharge, even if the institution itself is responsible for effectuating and paying for the discharge. Second, accrediting agencies should work closely with institutions to ensure that leave of absence policies sufficiently maximize student interests both with respect to refund policies and the status of leaves of absence at the time of closure.

 

Further Reading