Dive Brief:
- In a recent interview with Education Dive, risk management expert John Morahan said recent lawsuits against MIT, Yale and NYU over retirement plan management fees are indicative of a rising trend.
- Morahan pointed to a lack of oversight and an increasingly litigious climate surrounding fees in higher ed in general as top reasons why institutions should expect things to "only get worse for these institutions."
- Though he said institutions with large endowments face the highest risk of being targeted by these class-action lawsuits, Morahan said smaller institutions are not totally off the hook — "they may not be as high on the radar, but they definitely have the same kinds of issues," he said.
Dive Insight:
In a climate in which institutions are coming under increased scrutiny over growing endowments in the face of rising tuition and fees, Morahan said plaintiffs' attorneys are "looking for ways to go after" these institutions, and "excessive fees, conflicts of interest" associated with managing retirement portfolios are an easy target. And while smaller institutions are less likely to draw attention of plaintiffs' attorneys, such a lawsuit against an institution with smaller endowments and legal funds "could put some of these schools out of business if they're not paying attention," he said.
The lesson institutions of all sizes should take away from the current struggles facing Yale, MIT and NYU is paying closer attention to the terms of all contracts involving services or benefits to students or staff. A closer examination — and, where necessary, renegotiation — of any associated fees and potential conflicts of interest in management in any contract may be time-consuming, but it's simply good business practice. And the closer attention to contracts shouldn't stop at service contracts to benefit students and staff; institutions should take care to review their liability agreements to safeguard against any potential lawsuits' impact on operations.