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Impact Analysis for Higher Education: Weighing Risks Posed by Demands for Tuition and Housing Refunds

“Stay-at-home” orders in response to COVID-19 have shifted learning from college classrooms to online platforms and emptied residence and dining halls. Campus administrators are responding to demands from parents and students to refund tuition, housing and meal plan costs, and student fees. Most institutions have adopted policies to reimburse prorated fees and expenses, but are not offering tuition refunds. For many families, this is not enough, and several have filed class-action lawsuits against the schools, with more likely to come.

Students are not getting what they expected

An online instruction experience is not what college students desired or bargained for this spring semester. An array of faces and voices on Zoom or Google Meet can be difficult to synchronize and slower to engage. Quality of instruction varies; some faculty can get by with “read this, watch this video, complete this assignment.” However, virtual classrooms leave behind the experiential learning and collaboration essential to some fields of study (e.g. performing arts) or access to labs and equipment key to STEM courses (e.g. engineering or biomedical sciences). Learning has become disconnected, cheapened by less stringent (or no) grading, and less of a shared campus experience. Students in competitive, high-priced graduate programs feel especially cheated.

Resident students also pay thousands of dollars in fees for housing, meal plans, and student activities. Most schools, responding to government-imposed “stay-at-home” orders, either required or strongly encouraged students to vacate residence halls. Other campus facilities were closed and scores of student activities, including sporting events and commencement ceremonies, were canceled.

Schools are partially refunding costs for housing and meals, but not tuition

Across the country, most schools (about 75% according to a survey of housing officers reported by The Chronicle of Higher Education) have offered credits or refunds for housing, meal plans, and other fees. Some acted proactively; others responded to student protests. But in many instances, there are gaps that may be unacceptable to families—either fee refunds that do not cover all costs or offers limited to future credits to student accounts.

Tuition, typically the most significant cost of college education, is largely not included in any proposed refund programs. Classes are continuing online, and college administrators reason that students are still receiving valuable instruction and course credit.

Here in Minnesota, colleges and universities have switched to remote learning platforms. Residence halls at private and public colleges and universities are largely closed, except for students that have received permission to remain on campus. Some campuses have adopted policies that make it easier for students to elect to remain on campus, while others appear to have a much higher bar of showing extenuating circumstances.

No Minnesota institutions have publicly committed to tuition refunds, although they are offering refunds or credits for other expenses. The University of Minnesota System adopted a Comprehensive Student Fees Refund Plan that will provide students with a 100% credit for housing, dining fees, parking fees, recreation and wellness fees, and transportation and safety fees, and 50% of student services fees, prorated from the end of spring break through the end of the semester. Other institutions have similar policies—some offering refunds of meal plans on a case by case basis, while others have a blanket policy intended to prorate the cost of those plans for all students.

In all cases, refunds will be applied to student accounts and used first to pay any outstanding balances. Some institutions plan to send checks to students for any amounts leftover, while others appear to require students to apply for refunds. It is not clear whether cash refunds are available unless the student is a graduating senior; other students may have no option other than a credit on their accounts.

Protests have spawned class action lawsuits

Colleges and universities are doing what they can to cope with the tremendous financial burdens and disruption caused by COVID-19 (helped by institutional relief and direct student aid under the CARES Act), but many will still face lawsuits from dissatisfied students.

Law firms are recruiting students as plaintiffs, with strategies such as the website, created by the Anastopoulo Law Firm of South Carolina. This firm, and others, have already filed complaints against several major institutions, including Arizona, Colorado-Boulder, Columbia, Drexel, Liberty, Miami, Michigan State, and Purdue.

There are many similarities between the suits. All are class actions, alleging breach of contract and unjust enrichment, and most demand refunds of both tuition and fees, although two complaints seek only fees. In those cases demanding tuition refunds, the plaintiffs allege that online learning is not the equivalent of the in-person, interactive education that they chose and paid for.

For instance, the complaint filed against Colorado-Boulder describes many aspects of a college education that students cannot experience remotely:

  • Face to face interaction with professors, mentors, and peers
  • Access to computer labs, study rooms, laboratories, and libraries
  • Student governance and student unions
  • Extra-curricular activities, groups, and teams
  • Student art, cultures, and other activities
  • Social development and independence
  • Hands-on learning and experimentation
  • Networking and mentorship opportunities

Representations made by colleges and universities to recruit students are now being used offensively by the plaintiffs who cite descriptions from websites about the importance and value of the on-campus experience. In the case of Colorado-Boulder, the complaint displays a screenshot touting “CU Boulder Life” promising to “help students succeed both inside and outside of the classroom” by “meeting new friends and getting involved in student groups and events.”

Tuition refund lawsuits may face long odds

Institutions facing demands that they refund or credit a portion of the unused room and board fees are in a tight spot, as the equities favor students who were constructively evicted from campus housing and denied access to their meals. Doctrines excusing performance—force majeure and impossibility, for example—rely heavily on the contract language and factual circumstances. The potential legal exposure, as well as the reputational risks, likely explain the decisions by most schools to provide some reimbursement.

The tuition refund cases, however, will face formidable legal barriers. A breach of contract claim seeking tuition refunds must allege more than a failure to deliver an “educational experience;” it must demonstrate non-performance of specific promises. The contractual relationship between a student and the institution depends on commitments contained in course catalogs, bulletins, circulars, institutional guidelines, and even marketing material. Courts have repeatedly found that vague, aspirational statements do not rise to the level of an actionable promise.

Moreover, the breach of contract inquiry is limited to whether the institution failed to deliver its promises at all, not whether its delivery was deficient. The “educational malpractice” doctrine bars claims that attack the quality of instruction and require courts to inquire into the nuances of educational methodology. Absent a conspicuous failure to deliver fundamental elements of a course of instruction (e.g., no lectures, no assessments, no degree), courts will not substitute their judgment for that of college administrators and faculty.

Similarly, the “unjust enrichment” claims would require proof that the universities retained tuition without providing educational benefits to the students. Here the equities will favor universities that have retained faculty and staff, continued to deliver instruction (albeit online), awarded academic credits, and conferred degrees. Payment of tuition cannot be “unjust” if the students received the benefit for which they paid.

Schools must balance reputation, enrollment, and liability risks

COVID-19 struck higher education at a time when institutions already faced financial challenges posed by reduced enrollment, escalating student debt, and disenchantment with the value of a traditional college degree. University leadership should be sensitive to reputational risks and focus on student retention for the next academic year. Accordingly, partial refunds for housing costs and student fees are both favored and financially prudent decisions, especially when the financial impact can be cushioned by institutional relief funds under the CARES Act. Such accommodations to parents and students, already taken by a solid majority of schools, will likely curb the growth of litigation over unused housing, meal, and student activities fees.

The tuition refund cases may be more menacing. The premise on which they are based—that virtual instruction powered by expanding educational technologies is inherently inferior—is at odds with the trajectory of higher education’s future. Moreover, university leaders will not be keen on the probing of plaintiffs’ lawyers into intricacies of higher education financing. Still, as faculty continue to engage students online and award academic credits and degrees, colleges and universities will have substantial factual and legal defenses to fight off tuition refund claims.

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