Dealing with the fallout of sudden college closures

As more institutions close, students need more advance notice

IN 2018, I helped finance a class action lawsuit by a group of former Mount Ida College students who were effectively kicked out of school as a result of the college’s sudden bankruptcy. The students and their families were caught completely off guard, and given little guidance on how to navigate the management of their financial aid, scholarships, or academic credit.

One of the judges who heard the case questioned the harm done by Mount Ida to its student body by recalling his own college trajectory, which included a transfer from Stanford to Harvard – without any ill effects.  The difference between a voluntary transfer and a sudden expulsion due to a college’s closure was just one aspect of the case that the court struggled to grasp.

Now, more than four years after Mount Ida abruptly shut its doors, a new report by the State Higher Education Executive Officers Association documents the grim repercussions for students who experience the closure of their college. More than half never re-enrolled at another school. Even among those who did eventually re-enroll, more than a quarter missed at least a year of education before returning to school, and more than half dropped out without earning a degree or credential.

Since 2004, a staggering 861 colleges and universities have shut their doors. In 2016 alone, a total of 120 colleges shut down. Although the number has decreased since then, 2021 saw the closure of 35 more schools.

While college closures are historically tied to for-profit institutions, non-profit colleges and universities are not immune. Massachusetts has seen nine non-profit colleges close or merge since 2016, giving us the dubious honor of being first in the nation for non-profit college closures.

In the case of Mount Ida, the demise of the college came from what officials called a “perfect storm of failures” that included an increase in dropout rates and the corresponding decrease in tuition, increasing operating costs, and failed efforts to sell off portions of the campus.

This prompted Massachusetts Gov. Charlie Baker to sign a bill requiring colleges to share more information about their financial footing with state regulators. To protect the reputation of the colleges, however, there are strict confidentiality rules that govern this monitoring of colleges’ finance. That unfortunately means that students and their families are unable to evaluate the true viability of the colleges they choose.

Although Massachusetts has made progress by creating a review and monitoring system of the financial stability and viability of its colleges and universities, the alarming news that Bay State College has lost its accreditation and is likely to close this summer shows that more must be done to increase transparency and accountability in college financing. We must ensure that no student is caught off guard in an abrupt closure again. It starts with a college’s board of directors. The board must be educated as to its responsibilities and held accountable if its actions compromise the ability of students to complete their education.

Ultimately, in the case against Mount Ida, the judges decided that college officials don’t owe students any fiduciary duty to reveal their institution’s financial woes. As enrollment rates continue to decline and more colleges try to strike the balance between falling enrollments, the cost of tuition, and the increase in operating costs due to inflation, this lingering question of responsibility remains open.

And thousands of students are left wondering: will their college be next?

Robert Hildreth is a philanthropist and education reformer. He is the founder of Inversant, La Vida Scholars, and other nonprofit organizations with complementary missions of expanding access to high-quality education opportunities to low-income families and restoring the promise of higher education.