Court Ruling Confirms: HBCUs Do Not Have to Share If They Are Going Out of Business

A federal judge in Massachusetts has dismissed a lawsuit from former students at Mount Ida College, who claimed that the school defrauded them by not disclosing the financial struggles of the institution.

Mount Ida, which closed in late 2018, had operated in a financial deficit for three years before shuttering. Students claimed that the failure to notify them of the school’s financial problems precluded them from options to transfer and spending money on a failing school.

But the judge determined that a relationship between a college and its students does not require for the institution to offer financial disclosure to students beyond regular public financial filings, and does not prohibit the school from omitting certain details in institutional messaging and reports.

The ruling is clear: if a school closes, students and faculty have no legal recourse to sue and win money from a school that closes for financial reasons. This is in direct contradiction to lawsuits against for-profit institutions, which settled with former students for promoting false benefits associated with enrollment.

But it also speaks to a broader point about the responsibility students, faculty and alumni have in actively looking for information about schools’ financial health. All tax documents are public. Most of the important financial information about a college is available through the US Department of Education online database and tracks over decades for most cases for public and private institutions.

These sources allow local and national media to disclose information about the struggles of schools like Bennett College, Cheyney University, Stillman College, Wilberforce University, Bethune-Cookman University, and others. But is it better for stakeholders to learn about legitimate financial trouble through the media, or through the schools with which they hold social contracts for mutual financial benefit?

The government and the judiciary agree that colleges and universities as corporate entities only have to provide what tuition agreements say they must deliver; education and certification of the same in the form of a degree. But if schools do not want transparency about their financial distress, and stakeholders don’t bother to research it, who is really to blame for the stress on the HBCU sector?

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