Bankruptcy Is Untenable
for Distressed IHEs
BY ERICH S. BUCK & HENRY B. MERENS, PARTNERS, ADELMAN & GETTLEMAN LTD.
The challenges facing any entity in financial distress are numerous and complex. During the latest
recession, the market-wide downturn
exposed the underlying weaknesses
in the business models of failing
enterprises. Institutions of higher
education (IHEs), such as private and
public not-for-profit and for-profit
colleges, graduate schools, and post-
secondary vocational schools, were
not immune to market forces that
battered financial sectors across the
board at the onset of the recession.
Many IHEs faced declines in enrollment.
In addition, public IHEs confronted
significant cutbacks in state funding.
The recession also laid bare the failure
of IHEs to adapt to demographic shifts,
widening disparities in income levels,
and the ever-growing significance
of technology in the job market.
Some IHEs were able to maintain
profitability in the short term through
a combination of lower admission