Vista College, a chain of for-profit college campuses, closed and went bankrupt a few days ago. Most Vista campuses are in Texas, but the chain filed its bankruptcy proceedings in Delaware.
Who owns Vista College?
Education Futures Group (EFG), a Chicago-based private equity firm, holds a majority interest. Jim Tolbert, Vista's CEO, owns 16.7 percent.
EFG's website describes Vista College as "one of the most popular and recognized institutions of higher education in the south-central United States." Yup. Right up there with Rice, Tulane, and SMU.
Apparently, however, not everyone agrees with EFG's self puffery. A Texas law firm filed a class-action suit against Vista seeking damages on behalf of approximately 3,000 former Vista students.
Will students get any money out of Vista? I kinda doubt it. I'm sure EFG's lawyers know how to structure a bankruptcy action so that none of Vista's owners will miss any meals.
Vista College is the latest in a string of for-profit schools to go belly up in recent years. As far as I'm concerned, the more for-profits that close, the better.
America doesn't really need a for-profit college sector. We already have a surplus of public and non-profit institutions. Vista's headquarters is in Richardson, Texas, a suburb of Dallas. The Dallas metropolitan area has 38 colleges. Vista has a campus in Beaumont, Texas, home of Lamar University. It also has a campus in El Paso, home of the University of Texas at El Paso, and a campus in College Station, home of Texas A & M.
The for-profits built a niche based on the pitch that they offered online courses for working adults, but that line of patter doesn't work anymore. Public institutions have invested heavily in online learning. Students can now get a bachelor's degree, a master's degree, and even a doctoral degree from a public university without ever going on campus. So why would anyone want to enroll at a for-profit college, which will likely cost more than a similar public school?
The for-profits also tout the fact they offer vocational training, which the public universities don't provide. But publicly funded community colleges now offer vocational and technical programs, and community colleges are cheaper than for-profit schools.
Delaware is a friendly venue for corporations, and I feel sure Vista and its owners will zip right through bankruptcy. And I'm OK with that.
But many of Vista's former students will find themselves with a mountain of student-loan debt and no credential. Can they file for bankruptcy in Delaware and get the same cozy treatment that bankrupt corporations get?
No, they cannot. Texas students can file an adversary proceeding in a Texas bankruptcy court in an effort to get their federal student loans discharged.
But lawyers for the Department of Education or one of its debt-collection agencies will show up to fight a bankruptcy discharge of student debt.
In other words, the bankruptcy process works better for for-profit colleges than it does for their students. For a for-profit college, bankruptcy is relatively painless. But a for-profit college student will find it virtually impossible to get free of student loans that were taken out to attend a for-profit college--even one that is owned by a private equity firm and goes bust in mid-semester.
