Both private and public colleges and universities have struggled with financial pressures and, increasingly, some have taken extraordinary measures in response. From 2016 to early 2020, roughly 40 nonprofit institutions closed and another 50 experienced some form of merger or consolidation—and that was before campuses were ravaged by the COVID-19 pandemic. Public institutions in a variety of states, commonly thought immune to many existential threats, have also been pushed to the point of consolidation and campus closures. But what are the legal ramifications for which institutions should prepare to be able to move quickly in the face of acute financial distress? A spectrum of scenarios—and key questions—include:
- Reducing or eliminating majors or programs. This is the least drastic alternative but still involves significant risk of claims from students and tenured faculty members who may be terminated. What contractual and other obligations do you have?
- Affiliating, consolidating, or merging. Each of these involves some change of institutional control. Have you considered obtaining regulatory approvals and federal student financial aid continuation?
- Closing the institution. Closure is governed by multiple federal and state laws and regulations. In addition to satisfying these requirements, do you have an effective and compassionate communication strategy for stakeholders, especially students who need options for completing their degrees?
Hillary Pettegrew is the senior risk management counsel for United Educators (UE), which recently released a series of publications addressing how to plan for and implement difficult structural changes; this podcast offers a preview. AGB members are welcome to join UE for a free Q&A webinar, Higher Ed Program Changes in a Time of Crisis: Questions and Answers, on Thursday, May 14, at 1 p.m. Eastern, to ask the authors your questions. The publications will be available through the webinar portal during the event; employees of UE member institutions also can access copies here.
Register for the webinar with your institutional email here: na.eventscloud.com/ereg/newreg.php?eventid=540263.
Selections from Risk Management, Second Edition:
Opinions expressed in AGB blogs are those of the authors and not necessarily those of the institutions that employ them or of AGB.