Colleges Can Be Forced to Return Tuition When Parents Go Bankrupt

Colleges can be forced to return tuition payments made for students whose parents can’t cover their own debts, according to a federal appeals court ruling that opens up higher education institutions to more litigation in bankruptcy courts, WSJ Pro Bankruptcy reported. A Boston appeals court said on Tuesday, November 12th, that tuition payments can be taken back and redistributed when a student’s parents declare bankruptcy. The ruling on November 12th sided with a bankruptcy trustee who sued Sacred Heart University of Fairfield, Conn., to regain tuition paid on behalf of a student whose parents were involved in a multimillion-dollar fraud that ended with one parent in prison. The decision said that because parents don’t directly benefit economically for sending adult children to college, the tuition they paid can be claimed. The tuition payments “furnished nothing of direct value” to creditors of the parents, said the U.S. Court of Appeals for the First Circuit.

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