Can bankruptcy laws save higher education?
- A commentary in the upcoming issue of Association of Governing Boards magazine profiles the struggles of higher education to survive with decades of debt tied to construction, shifts in enrollment profile and numbers, and public divestment from the industry.
- While most industries can restart their business fortunes through filing for Chapter 11 bankruptcy, universities are blocked from filing by Department of Education rules which immediately terminate eligibility for financial aid disbursement if a school goes into bankruptcy.
- Observers say reversing ED's policy on bankruptcy filing would revitalize higher education and allow institutions to find new ways to adjust to new realities in the marketplace.
While the nature of federal government is inflexible and prone to criticism on outdated policies, the recommendation for business realignment for colleges and universities does carry some merit. On the surface, there would need to be guidelines on which schools could qualify for protections, specifically for areas in endowment fund usage, enrollment trends and funding from state or federal government.
But for smaller institutions with niche missions, there could be allowances made for these campuses to use a reset button on financing and debt servicing to get a better foothold on administrative right-sizing and strategic planning.
- Association of Governing Boards Bankruptcy Benefits
- Education Dive Institutions face balancing act when weighing construction projects