Tuition Refund Class Actions Abound: How Institutions Can Prevent or Minimize Lawsuits in the Coming School Year

Spring 2020 saw an extraordinary response to governmental orders addressing the COVID-19 pandemic. Amongst those responses was a switch from on-campus, in-person learning and living to remote/distance learning at many colleges and universities to protect the health and safety of students, faculty, administrators, and staff. As a result, numerous colleges and universities have found themselves defendants in class action lawsuits demanding partial refunds of tuition, room and board, and other fees based on allegations that remote/distance learning is inferior to the on-campus, in-person education they were “promised.” These lawsuits generally assert claims for breach of contract – without actually identifying the contract that was breached – as well as for unjust enrichment or conversion.

While it’s too late to change the facts and circumstances underlying the already-filed lawsuits, there are steps colleges and universities should be thinking about in light of the uncertainties surrounding resuming on-campus, in-person instruction this fall. There’s no doubt that many of the same lawyers who filed the spring 2020 class actions are primed to pounce if they – and not necessarily the bulk of students – think something is “unfair.” Although nothing can prevent a lawsuit, the actions outlined below may help insulate colleges and universities from, or hopefully minimize the risks of, such lawsuits.

Clear, Candid, Continual Communication

It should go without saying that it’s critical to keep stakeholders – students, faculty, administrators, and staff – informed about the school’s reopening plans. Since governmental restrictions vary from state to state, and even within states, each institution’s plans will vary. Students may be coming from outside the area and, therefore, may not be familiar with the limits placed on the school; circumstances in New York City are a far cry from those in Iowa City. Consequently, communications should keep students and others abreast of requirements and guidance from state and local governments, as well as accreditation organizations that affect each institution’s reopening efforts.

These communications should be vetted with in-house or outside counsel to maintain openness while at the same time ensuring the school has the flexibility to deal with ever-changing circumstances. Beyond that, having a record of these communications will help demonstrate that your institution took appropriate steps to keep its students and employees informed.

Document the Evolution of Reopening Plans

We’re in uncharted waters right now with the situation changing day to day, as are reopening plans. Each change necessarily weighs a variety of pros and cons as colleges and universities strive to provide the on-campus, in-person educational experience they’d like to provide, while at the same time protecting the health and safety of students and employees. Creating a “paper trail” of the entire decision-making process will help institutions defend themselves if any of their decisions are later challenged.

Review Contracts

As noted above, all of the class actions already on file have made a claim for breach of contract, almost always without identifying the specific contractual language allegedly breached. Every institution necessarily has its own contractual relationships with its students, but in a breach of contract lawsuit, the terms of the contract will determine whether there’s been a breach and, if so, how it’s addressed. Schools should review their enrollment, room and board, and other contracts and consider whether to include, or modify, the following provisions:

• Force majeure: What does the contract say about “acts of God” and other circumstances hindering performance?  COVID-19 has shown that epidemics, pandemics, and governmental restrictions preventing on-campus, in-person education should be included in force majeure provisions.
• Dispute resolution:  How and where disputes are handled can affect whether they’re even brought at all.  Mandatory arbitration – to the extent it’s permitted and how it has to be worded varies across jurisdictions – may have the benefit of keeping a private dispute private.
• Class-action waivers: Although now nearly ubiquitous, class actions are a fairly recent phenomenon, as federal and state court rules only started permitting them in the last 50 years.  Though they’ve exploded in the time since then, they’re not an indispensable fundamental right.  A class-action waiver provision takes the wind out of the sails of class-action lawyers.

Institutions must also consider whether the contract language contains anything about refunds and how those provisions should be modified based on recent experiences.

Examine Tuition Structures

One of the recent tuition class actions involved a school that offered both on-campus, in-person learning as well as remote/distance learning. Because the institution charged lower tuition for remote/distance learning, the plaintiff’s lawyers used this differential to argue that remote/distance learning is worth less than on-campus, in-person education and, therefore, students should be refunded that differential for having to switch to “lower value” remote/distance learning. Colleges and universities should examine their in-person versus online tuition rates and be prepared to justify the differences if challenged.

Some institutions may have the wherewithal to provide refunds to students for the 2020 spring semester and even the 2020 fall semester if circumstances warrant, but many others may not. The costs for the 2020-2021 school year are pretty much etched in stone, regardless of whether or when the college or university returns to on-campus, in-person education. Moreover, some students may be hesitant to return to campus this fall in light of these uncertain circumstances. Institutions may want to consider allowing students to pre-pay their 2020-2021 tuition and, if the student decides to defer a semester, or even a year, the student would be guaranteed that tuition rate, without any increases. (Indeed, some schools have permitted students to pre-pay their entire tuition, thereby “locking in” their initial tuition rate without incurring the inevitable increases over their university attendance). Pre-payment would provide the institution with the cash it needs now and the students with the certainty that their tuition won’t increase if they opt to delay their return to campus.

Review Marketing Materials

There’s much to be said about the benefits of on-campus, in-person education. But colleges and universities should be cautious not to say too much about those benefits. A number of the recent tuition class actions have quoted directly from schools’ marketing materials boasting of the significant benefits of on-campus, in-person education. That’s not to say colleges and universities shouldn’t tout the benefits of on-campus, in-person education, but there’s a fine line to be walked there.

Institutions should also consider their experiences with remote/distance learning as a result of COVID-19. How did students and faculty adapt and react? What positive feedback can be woven into marketing materials? Schools are, or should be, keeping students and employees abreast of their fall reopening plans through regular communications, as well as using marketing materials to let prospective students know that the institution responded to the COVID-19 crisis appropriately, students and faculty continued their education seamlessly and without adverse consequences, and that plans are in place should remote learning be necessary again.

Review Student Handbooks

Changes made in contracts and tuition structures (or other fee agreements) must be carried over to any student handbooks to ensure consistency, as should any revisions made to institutional marketing materials. Institutions should consider whether any policies and procedures created for responding to COVID-19-like outbreaks or other events limiting or prohibiting on-campus, in-person instruction, and the steps the institution will take to respond, should be spelled out in the student handbook.

Review Insurance Policies

If another pandemic hits, or the predicted second wave arrives, will the institution’s insurance policies provide coverage? Some business interruption policies exclude coverage for epidemics or viral outbreaks. Those exclusions may be, or become, critical in case an institution has already been sued or is sued due to COVID-19-related shutdowns or future COVID-19-like crises. Institutions should explore whether riders or other policies can help mitigate the financial impact of another outbreak.

Learn From Experience

Each institution must take stock of how well the switch from on-campus, in-person education to remote/distance learning worked, how students and faculty responded, and what improvements can be made for similar future scenarios. 

Institutions should review online offerings and support, including online video platforms that permit professor-student interaction and a virtual classroom environment, and consider improving interactive platforms to allow for virtual mentoring and networking events, so that students can receive benefits similar (to the extent possible) to that which they receive when they’re physically present on campus.

Student feedback on the spring 2020 switch to remote/distance learning may be crucial in case of a lawsuit, because the crux of the current wave of tuition class actions is that students didn’t get the benefit (on-campus, in-person education) of their bargain (tuition and other fees). However, if students reacted positively to the switch and don’t feel they lost out, that could be powerful information in defense of any potential class action.

Moreover, many professors post their class notes online, as well as problems and solutions, for students to prepare for in-person instruction and to have for review after class. Experience dictates that some students simply skip the in-person instruction and rely on the online postings instead. Being able to maintain metrics on students who attend in-person instruction versus those that rely solely upon online materials could help defeat a future tuition class action: If some percentage of students never went to class and instead used only the online resources, were they somehow damaged by going to remote/distance learning? To ask the question answers it. 

Nothing can prevent someone from filing a lawsuit if an institution has to go “online” this fall, but these steps may help colleges and universities minimize their risks.

For more cutting-edge perspectives on legal and business implications of COVID-19, visit our COVID-19 resource center.