Dowling College Files for Bankruptcy – Why Are Schools Going Bankrupt?

Dowling College files for BankruptcySome universities perform better than others, attracting much-needed students. In contrast, some schools suffer from decreasing enrollment, at times leading to bankruptcy.

Such was the case with Dowling College, a nonprofit liberal arts college near New York City. According to Reuters, the Long Island, New York school shut down after 48 years of operation. Last year, the college defaulted on $54 million in financing it had obtained through local government agencies. 

Dowling College to sell real estate and other assets

Newsday noted that Dowling laid off around 450 faculty members in the wake of filing bankruptcy in the Eastern District of New York. Prior to shutting its doors, the college served 1,700 students. 

The school has two campuses: in Oakdale and Shirley, New York, as reported in The Wall Street Journal. Dowling’s bankruptcy attorney, Sean Southard, said the college will take advantage of its bankruptcy to sell its real estate and other remaining assets, about $600 million across the two campuses. Its debt amounts to between $50 million and $100 million. 

Dowling isn’t the first school to file bankruptcy in recent years, but it does stand out as one of the few non-profit schools to do so. ITT Education Services and Corinthian Colleges also filed for bankruptcy not too long ago. 

Why are schools going bankrupt? 

The reasons for school bankruptcies vary depending on the size of the institutions in question, as well as the academics they offer. A study from Moody’s Investor Service found that closures and mergers among small colleges throughout the U.S. will likely rise in the next few years due to decreasing revenue from falling enrollments, according to Moody’s Vice President and Senior Credit Officer Dennis Gephardt. 

“Enrollment declines and lost market share for smaller colleges continue to spur closures and mergers, as students increasingly opt for larger colleges with greater academic resources,” said Gephardt. “However, the low total number of closures and mergers suggests a muted impact on the sector, especially given the small size of these colleges.” 

Moody’s maintained that small schools often fail because of their current cost structures. Most rely on enrollment (and therefore revenue) or gift grants to operate, none of which is enough to reinvest in their academic curricula.

Academia moving forward 

Initially, some schools may increase their tuition, but Forbes contributor Tom Lindsay suggested such tactics may exacerbate the issue. Lindsay noted average tuition has risen 440 percent over the past 25 years, four times the rate of general inflation. Students and parents, wary of falling into debt, have chosen to attend larger universities with more affordable tuition.

The higher education industry is complex, and facing intense criticism from both consumers and the federal government, therefore, schools will have to find innovative ways to acquire funding.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.

Joel Glucksman is an experienced civil and bankruptcy litigator specializing in the representation of secured lenders and other creditors in complex suits and bankruptcies. His court appearances take him throughout the State and Federal courts in the metropolitan area, focusing in particular on the Bankruptcy Courts for the District of New Jersey and the Southern and Eastern Districts of New York. For more information, please visit Joel Glucksman's full biography at Scarinci Hollenbeck

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