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US Outlook: Top Questions for Higher Education Amid Novel Coronavirus Outbreak

April 06, 2020
Firm Memoranda

Summary: The emergence of the global coronavirus pandemic has created perhaps the most significant challenges for colleges and universities in their history. Forced to largely close their
campuses and require the vast majority of students to pack up and leave in a matter of days, educational institutions, both public and private, are now grappling with a range of complex issues—some of which have already spawned lawsuits—amid a burgeoning COVID-19 crisis. These issues range from how to maintain the same quality of education and sense of community in an online environment to whether room and board fees should be partially refunded; how to weather massive drops in revenue due to diminished school populations and cancelled sporting and alumni events, to how ongoing contracts with third-party vendors should be handled.

Underlying these and other issues is a singular question: how long will this crisis endure? For educational institutions, this elusive question has particular salience due to the need to fulfill their duties by planning for and executing safe and equitable reentry protocols, addressing increased demands for mental and physical health services once potentially traumatized students return, and mitigating likely devastating hits to their budgets and endowments. Universities requested $50 billion in stimulus money from the federal government to address losses and additional expenses incurred during the COVID-19 pandemic but received little more than one-quarter of their request in the final package. The financial strains educational institutions are undergoing could implicate insurance coverage and contractual issues, including loan and bond commitments. Similarly, schools may well consider cost-cutting measures such as suspension or reduction of payments on existing construction contracts, food service contracts, or even to faculty and staff. In some instances, university decisions may implicate contractual provisions known as force majeure clauses or the legal doctrines of impossibility and frustration of purpose.

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