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“Where’s my money?” Should College Students get Tuition Refund

Disclaimer: I am not a US-qualified attorney and the following should not be considered legal advice. You should seek appropriate counsel for your own situation.

The pandemic has sent shockwaves through American society and redefined many of the legal relationships amongst its constituents. One of the incidental debates has centered on the fragility of institutions of higher education and their dependency of the economy. When many of these institutions transitioned abruptly to distance learning, students were forced to vacate their campus housing and teaching was conducted remotely. While these decisions are generally consistent with governmental guidance, they have sparked debates among relevant parties about whether these institutions provide a partial reimbursement of tuition.

Some students have argued that their learning experience has been irreparably compromised: there is no like-for-like replacement for face-to-face interaction with professors and peers, hands-on learning and experimentation, and social development and independence. These deprived benefits are unique to, and derived from, the unexpected migration from brick-and-mortar learning in March.

While some (if not all) of these institutions have offered partial refunds for on-campus activities, such as housing and athletic amenities, the likelihood of tuition reimbursement appears to be elusive. Over the past few months, multiple putative class actions have been filed against higher education institutions over the interruptions due to the pandemic. Depending on the tuition policy of these institutions when classes resume, more lawsuits are likely to ensue and their outcome will provide insight into how the courts will evaluate similar claims for years to come.

Is it a contract and, if so, a breach of contract?

To date, multiple lawsuits have centered their arguments on a breach of contract or unjust enrichment, with the latter typically being invoked when the validity of a contract is in question. Although a traditional written contract between students and universities is not always readily available, case law in many states suggests that a contractual relationship exists if not only implied between students and universities. The terms of such contracts, however, might be heavily contested. Historically, universities have been afforded wide discretion in the manner with which they carry out their educational duties. This precedent is supported by case law that stipulates, amongst others, that “professional educators — not judges — are charged with the responsibility for determining the method of learning that should be pursued for their students” (Paladino v. Adelphi Univ) and that universities have “leeway in modifying their programs from time to time to exercise their educational responsibility properly” (Kashmiri v. Regents of Univ. of California).

Ultimately, the validity of the contracts between the contesting parties may depend on the law of each state and the particular facts of each case. In addition, there is the ground on public policy. In addition to the historical deference afforded by the court to institutions of higher education, their compliance with health and safety orders from the government to avoid large gatherings might provide another strong defense against any refund lawsuits. In a similar vein, the universities might rely on force majeure clauses and common law doctrines such as the impossibility to defend against refund claims. However, if a university asserts that part of its performance was rendered impossible by force majeure events such as the global pandemic or a mandatory government order, the students might have a claim to recover the loss in the value of the services due to unforeseeable events. As such, from the university’s perspective, it is far more likely and beneficial to argue that there is no material difference between the quality of online and offline learning experiences than to rely on an argument of impossibility.

Damages or no Damages?

In addition to the existence of a valid contract, to obtain a refund, students must prove damages, being the difference between the value of an on-site educational experience and the purportedly diminished value of their online experience. The complaints allege that online classes are not adequate substitutes for in-person instruction (online education being “subpar in practically every aspect” to in-person classes) and the interactive campus experience; as such, it is inappropriate to retain a portion of the tuition if the cost of providing online courses is far less than the price that students paid for in-person classes. However, the exact reduction in value is difficult to quantify if not entirely speculative. Studies have shown mixed results. Some researchers in China have suggested that with regard to learning performance, onsite learners had a lower attrition rate than online students. However, for learners who completed all of their learning assignments, there was no material difference between the onsite and online participants’ average scores and achievement. In fact, a number of universities, including MIT, have mandated the use of a more liberal “pass or fail” grading system. The lowered threshold for earning credit helped ensure that most students stayed on track to obtain their degrees. Plaintiffs might be asked to specify the contractual promises that they allege the universities made and how they have been reneged. The outcome would also depend on whether the institutions subject to the lawsuits are private and public universities. Some public universities may be able to defend against damages claims by invoking the 11th Amendment’s sovereign immunity protection.

Are the universities unjustly enriched?

In an unjust enrichment claim, the plaintiff usually must prove that the university has been enriched at the expense of the students in circumstances that the law sees as unjust. The courts have discretion to pursue justice in balancing equities. The biggest legal hurdle that the students face is proving that the university has obtained a financial or strategic windfall (unjust enrichment) by providing a less expensive online education. In fact, many schools might counterargue that they incurred substantial financial losses due to the interruptions, and some may even be forced to shut down. As a result, courts might be hard-pressed to agree with any disputable inequities that the students are claiming.

What’s next for colleges?

Irrespective of the outcome, these imminent lawsuits are part of a deep-seated debate about the fundamental value of a residential education. In a digital age and with the growing popularity of online forums such as Khan Academy, Coursera and LinkedIn Learning, do students need face-to-face classes to imbibe theoretical knowledge or reap the full benefits of higher learning? If a significant portion of the value of a residential education is to merely provide a platform for students’ intellectual growth and social development, what is the role of universities in supervising and fostering such growth? In a broader sense, is a college degree merely tokenistic? The argument would be complicated further by the defense that colleges ultimately decide on. If they respond by claiming that online learning is essentially as good as in-person learning, then how could they continue to justify the cost discrepancy between online and offline classes? And if online learning is an adequate substitute, why hasten to bring students back on campus in the fall, which might heighten the spread of infection?

Universities everywhere will be forced to reconsider their role in society and evaluate their relationships with their various constituents, stakeholders, and distressed communities. To fulfil their obligations as socially accountable institutions, universities, especially those with large endowments, will have to apportion responsibilities carefully and identify the correct degree of differentiation. The tuition refund impacts more than the bottom line of these institutions. The stance that universities take will have important implications on their to-date opaque governance and accountability, as well as the role they can and should play in exemplifying good corporate social responsibility. With the improbability of resuming complete normalcy looming large, a university should use their accumulated experience since the spring and adequately legislate for all probable contingencies. Universities must ‘zoom’ in on the crux of these complaints by minimizing the differences between online and onsite instruction in terms of the quality and usability of technology and teaching tools, instructional materials, and teaching and learning assessments, in order to mitigate the arguably diminished experience of online learning.

Head of legal with an MBA@MIT. Exploring topics on education, data privacy, tech, entrepreneurship and PE/VC landscape.