Background on College Closures

Between the 2008–09 and 2016–17 school years, over 300 degree-granting higher education institutions in the United States have closed their doors,¹ sometimes leaving students without options and with taxpayers holding the bag. An overwhelming majority of these recently closed institutions are for-profit colleges, which often serve a population of disproportionately low-income students receiving Pell Grants and federal loans.² Over the last five years, an average of 20 campuses have closed each month, leaving around 500,000 students (mostly working adults, low-income students, and students of color) affected, according to an analysis by the Chronicle of Higher Education.³ Recently, closures of for-profits have hit these communities particularly hard given disproportionate enrollment of marginalized populations in those schools, sparking national debate about increased accountability for these institutions.⁴

The data on the overall state of closures in the higher education system, however, obfuscate the different ways in which those institutions close, and why they close in those ways. Some have engaged in orderly closures, in which an institution winds down its programs over time to continue serving current students without welcoming more students onto a sinking ship. Others, unfortunately, have experienced precipitous closures, where institutions shut their doors virtually without warning, leaving students left wondering what to do. These precipitous closures harm the students and staff, who know little of the risk of closure until the doors are locked behind them, and erode trust in the higher education system.

These crash-landings do not need to be so difficult. Regulators have often failed to recognize the warning signs or take action early enough to cushion the blow of a closure with protections for students and taxpayers. States, accreditors, and the federal government must all be doing more to understand, anticipate, and prevent precipitous college closures, and to protect students and taxpayers in the event of such closures.⁵

We have explored a dozen precipitous college closures (both private nonprofit and for-profit), assessing the warning signs that were missed and the actions that were not taken to protect students. We reviewed some of the biggest collapses—such as ITT Tech, Education Corporation of America, and Dream Center Education Holdings, each with thousands of students impacted—and some smaller examples, like Marylhurst University, Mount Ida College, and Charlotte School of Law. We explored each closure across a range of metrics, including student outcomes; enrollment trends; governance concerns; speed and severity of regulator actions; institution response; and aftermath for students. We saw many nonprofit institutions with steep enrollment declines, and some with low—and falling—retention rates; many for-profit institutions with poor outcomes and operating under the spectre of multiple investigations and actions; and, unsurprisingly, many institutions struggling to maintain their financial circumstances in light of significant debt.

Additionally, as authors, we represent a wide range of higher education stakeholders—state authorizers, institutions of higher education, accrediting agencies, and consumer-protection advocates. We have worked at the U.S. Department of Education, within state higher education agencies, on accrediting commissions, in researching higher education policy, and more. We bring that expertise to this paper, and seek to provide recommendations for both policy and practice. We spoke with stakeholders across regulatory bodies and those they regulate—officials involved on both sides of college closures, and those with expertise on the issues at hand—in an effort to glean the lessons that should be learned from those experiences. We have also studied other research on college closures, such as recent reports from the Illinois Board of Higher Education, the National Student Legal Defense Network, and The Century Foundation.

Our recommendations are designed to address some of the most significant problem areas we have seen in the research: anticipating institutions at high risk of closure by identifying warning signs and risk factors earlier; increasing the take-up of students transferring to high-quality programs by improving the quality and timing of plans and agreements for helping students complete their educations or giving them viable options to do so (“teach-outs”); ensuring the careful management of student transcripts and other records; increasing transparency in and efficacy of communications to students, both before and after closure; increasing the take-up of closed school discharges among eligible borrowers; and ensuring that taxpayers are adequately protected in the event of closure, including when the college has other financial liabilities.

Additionally, we have identified some of the most significant gaps in the research and available data, listing out recommended areas for future work, including by the Education Department.