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Articles / Applying to College / Could Your College Close?

Could Your College Close?

Dave Berry
Written by Dave Berry | Nov. 26, 2019
Could Your College Close?


That's almost unthinkable, right? How could a place with such a beautiful campus, great professors, dorms and classrooms -- not to mention the sports teams! -- shut its doors? Well, you may be surprised at how many seemingly stable colleges and universities are on shaky financial ground.

When we think of "college," most of us picture a lush green quad with Gothic-style buildings and happy students playing frisbee or attending an outdoor class, sitting on the grass under a large oak tree. That's not always the case:

In the United States, there are approximately 5,300 colleges and universities. These … range from beauty schools to private Ivy League research universities like Harvard ... Combined, all of the colleges and universities are often referred to as "the American higher-education system." ... Numerous colleges may either experience mergers [or] closures

There's that word: closures. While it's not likely that you will be (or are) attending a college that's heading for financial crisis, there are such schools today. Let's take a look at that situation, using a variety of reporting sources. The facts may surprise you.

What triggered my interest in writing about this was a news item from last week: A Doomsday List of Possible College Closures Inspired Panic and Legal Threats. That's Telling, an article from The Chronicle of Higher Education. It leads off with an interesting description of those schools in financial difficulty, along with a shocking number:

Higher education's walking dead are already among us. Figuring out exactly who they are, though, is tricky and fraught.

That fact came into sharp relief this week, when a college-advising company scuttled its plans to release a list of private, nonprofit colleges that it expects to run out of money and close in the coming years, according to a new financial-modeling tool.

Edmit, the advising company, decided against releasing the information when some of the 946 colleges that were to be named in the analysis pushed back or threatened legal action.

The episode set off renewed discussion about the limited information that many students and families possess about the precarious finances of some of the nation's colleges, hundreds of which have closed in recent years, upending students' lives. (Most of the college closures of the last five years have been for-profit institutions, a recent Chronicle analysis found.) ...

You may be saying, "Yeah, most of those closures were by for-profit schools. I'm planning on going to a private nonprofit college." Notice what the Chronicle article said: "... [946] private, nonprofit colleges …" That's a big number.

Granted, we don't (yet) know the identity of those schools, but that's about 18 percent of the 5,300 mentioned -- almost one in five -- and probably a higher percentage if you don't consider specialty schools, branch campuses, et al. That should get your attention. Things are not always what they appear to be in the idealistic world of higher education.

Colleges at the Crossroads

If this topic piques your interest, here are three additional sources with further information about the delicate state of some schools:

- These Colleges' Finances Are Now Being Watched More Closely by the Education Dept.

Nearly 40 universities and colleges, including Howard University, are facing increased scrutiny from the U.S. Education Department regarding their finances, according to a list released on Thursday by the department. For Howard the designation is the latest setback for an institution that has weathered intense controversy over its student-aid practices

- Heightened Cash Monitoring

The U.S. Department of Education may place institutions on a Heightened Cash Monitoring (HCM) payment method to provide additional oversight of cash management. Heightened Cash Monitoring is a step that FSA can take with institutions to provide additional oversight for a number of financial or federal compliance issues, some of which may be serious and others that may be less troublesome

And third, a report reflecting consequences from 2009's financial "crisis":

- The Financial Crisis and College Enrollment: How Have Students and Their Families Responded?

how the Great Recession affected college enrollment and costs to familiesUsing data from the Integrated Postsecondary Education Data System (IPEDS), an annual survey of colleges and universities, I investigate how the Great Recession affected college enrollment levels, attendance intensity, tuition costs, and financial aid. The analysis suggests college attendance levels increased during the recession, especially in the states most affected in terms of rising unemployment and declining home values, but it was part-time enrollment that grew while full-time enrollment declined ...

Now, with the above context, let's get practical with some interesting information about which you may not be aware. What to Do if Your University Closes its Doors, by Elizabeth Rittima from May 2019, addresses some key points that can help students affected by a sudden college closure. Here are some highlights:

A recent rash of colleges and universities have gone out of business, leaving students in a precarious position. What do you do when your school closes? Alumni are often left wondering if their degrees or certificates from closed schools are still valid.

Schools are closing for reasons that range from financial troubles to suspended or revoked accreditations. (Education Dive, an education-industry publication, lists more than 50 schools that have, since 2016, either closed or merged with other institutions.) [See the list of "How many nonprofit colleges and universities have closed since 2016?"]

If your college or university closes, don't panic: There are still ways to complete your education or obtain proof of earned degrees.

- Teach-out – A teach-out is an agreement between schools that provides for the equitable treatment of students and an opportunity for students to complete their program of study. If your school is offering a teach-out option, and you are comfortable with their ability to deliver on that promise, you can stay the course.

- Transfer to a new school … Most schools will only take up to 60 or 90 credits, depending on the length of the degree program you're choosing.

Here's a very important matter to consider:

Paying School Loans or Tuition Bills

Most students wonder how their school's closing will affect their loans. The answer isn't simple, as it actually depends on how the school was closed. If the school completely shut down, you may be eligible to discharge your federal student loans. If the school is offering a teach-out option, you can opt out and still may qualify to have your loans discharged — though this option is not available if the school merged with or was purchased by another school.

If you are planning on discharging your loans, please remember: You cannot discharge your loans if you are transferring to another school. If you discharge your loans, and then complete your degree elsewhere, you could be liable for those loans again.

Because a discharged loan is counted as taxable income, make sure you understand the financial implications of discharging loans.

If your school closes while you're enrolled or soon after you withdraw, you may be eligible for discharge of your federal student loan. Also, for an additional resource, do a Closed School Search, which is a guide to help you look up closed schools using one or more criteria.

Written by

Dave Berry

Dave Berry

Dave is co-founder of College Confidential and College Karma Consulting, co-author of America's Elite Colleges: The Smart Buyer's Guide to the Ivy League and Other Top Schools, and has over 30 years of experience helping high schoolers gain admission to Ivy League and other ultra-selective schools. He is an expert in the areas application strategies, stats evaluation, college matching, student profile marketing, essays, personality and temperament assessments and web-based admissions counseling. Dave is a graduate of The Pennsylvania State University and has won national awards for his writing on higher education issues, marketing campaigns and communications programs. He brings this expertise to the discipline of college admissions and his role as a student advocate. His College Quest newspaper page won the Newspaper Association of America's Program Excellence Award, the Pennsylvania Newspaper Publisher's Association Newspapers in Education Award, the Thomson Newspapers President's Award for Marketing Excellence and the Inland Press Association-University of Kentucky School of Journalism and Mass Communications Inland Innovation Award for the Best New Page. His pioneering journalism program for teenagers, PRO-TEENS, also received national media attention. In addition, Dave won the Newspaper Association of America's Program Excellence Award for Celebrate Diversity!, a program teaching junior high school students about issues of tolerance. His College Knowledge question-and-answer columns have been published in newspapers throughout the United States. Dave loves Corvettes, classical music, computers, and miniature dachshunds. He and his wife Sharon have a daughter, son and four grandchildren.

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