Universities At Risk Of Bankruptcy

At a time when student debt due to tuition fees is at an all time high, the idea of universities needing loans to avoid bankruptcy seems a little far-fetched, but this is exactly what appears to be happening.


Why Are Universities At Risk Of Bankruptcy?

It would seem that market forces are partially to blame. Universities are in competition with each other to attract students. With fees higher than they’ve ever been, the larger and more popular universities have been opening up more places and lowering entry requirements in order to take advantage of the significant funds each student brings with them. This appears to be leaving smaller, or less popular or universities, abandoned by prospective students.

With fewer students and, therefore, lower incomes, these universities are left with insufficient reserves to tide them over. The shortfall in cashflow has left some to resort to bridging loans in order to stay afloat.

Tighter controls on immigration may also be contributing to the cashflow woes of these higher education institutions. The UK has been a popular destination for students from abroad and such foreign students provide for a lucrative income for the universities which can enrol them. Unfortunately, there have been reports that the UK is now seen as a less welcoming place for those from abroad and with short stay work visas now less likely to be granted for graduates from abroad, the UK is a less attractive place for international students.


Will Any Universities Go Bankrupt?

Time will tell. With Universities being run like businesses,the usual rules of solvency and insolvency still apply.

If a University cannot attract sufficient students in order to meet the needs of its day to day running, then the situation can’t continue. Either funding will need to be found from elsewhere, costs will need to be significantly reduced, or the University will need to close.  It has been suggested that there won’t be any government bailouts for such failed institutions.

If Universities do start to close due to their financial unsustainability, this will naturally be a blow to the institutions themselves, the people who work there and those who’ve paid quite substantial sums to learn in them. Also, there will be a massive effect on the towns and cities where these universities are located where many businesses will depend on the money that students spend there.