USC in Tuition Battle: Former Students Will Face Consequences

In the latest battle over whether bankrupt parents should have paid for their kids’ college education, the University of Southern California made it clear that two former students will face consequences if the university loses a courtroom battle over nearly $180,000 in tuition.

In court papers, University of Southern California lawyers said if the school is forced to return the money, it will “be left with no choice other than to seek to recover all payments” from two former students whose parents, Charles and Claudia Ankrim, paid for their education before filing for bankruptcy in June 2013.

“Additionally, the children’s transcripts from USC will be frozen,” the school’s lawyers said in documents filed in U.S. Bankruptcy Court in Sacramento, Calif. ‘Therefore, any future employer or educational institution will not be able to independently verify through USC that the children actually graduated from USC.”

The family’s lawyer declined to comment.

The lawsuit is one of several dozen disputes that pits colleges against bankruptcy trustees, The Wall Street Journal found. In the suits, court-appointed bankruptcy trustees argue that parents should have spent their money on their own growing debts.

In the Ankrims’ case, a bankruptcy trustee who looked over their finances in the four years prior to their bankruptcy filing noticed that they had paid $178,985.77 in tuition and fees to the university for their son and daughter. Lawyers for trustee Geoffrey Richards sued in May for the return of that money, arguing that the Ankrim parents didn’t get any value for that expense.

Consumer bankruptcy experts who say these disputes were nonexistent several years ago predict that they will grow in number alongside the cost of tuition. After a front-page article in The Wall Street Journal explored the controversy, several federal lawmakers proposed a bill that would enable colleges to keep the money.

Most colleges have settled the lawsuits by agreeing to pay back at least some of the tuition, but a few of them—including the University of Southern California—have vowed to fight them.

In the latest court papers, the university’s lawyers stressed that the Ankrim children got a great education, calling the institution “one of the world’s leading private research universities” several times throughout the pleading and flaunting its U.S. News & World Report ranking. That education indirectly benefits the parents, providing enough value to justify the tuition expense, they said.

“College education from USC, more than pre-collegiate education, enables a greater opportunity and likelihood for well-paying jobs and careers. In turn, gaining employment and a professional future alleviates parents from the financial burdens of having to support their children during their adulthood. It also allows for the adult children to contribute to the livelihood of their parents if necessary. These are direct economic benefits that parents derive from providing a college education for their children. It also goes without saying that the noneconomic benefits are enormous, such as parents being fulfilled in their personal goals of having provided a college education and related experiences for their kids, and thereby establishing the strongest foundation possible for starting their own adult lives as USC believes the Debtors’ children have done.”

Judge Christopher Klein has yet to rule on the issue.

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech