Tuition Refunds
By Richard R. Hammar, J.D., LL.M., CPA
© Copyright 1991, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m65
Are students who withdraw from (or who are discharged by) a religious school during the school term entitled to a pro rata refund of prepaid tuition? One court has held: “Where a contract for schooling is for an entire specified term and a pupil withdraws for reasons of her own, without fault on the part of the school, it is the general rule that the school is entitled to the agreed tuition for the entire term.”1
Another court has defended this view on the ground that a tuition forfeiture is a reasonable means of compensating a school for the expenses it incurs in preparing for a child and holding a place for him.2 This assumes of course that the tuition forfeiture was expressly stipulated in the enrollment contract or in some other document incorporated by reference in the contract.
Other courts reject the legal validity of tuition forfeitures. To illustrate, one court ruled that when a private school charged tuition of $2,400 payable in full upon enrollment, and the enrollment agreement specified that students who withdrew before the end of the academic year were entitled to a pro rata refund less a nonrefundable enrollment fee of $600, such an agreement was “unconscionable” and unenforceable since the nonrefundable enrollment fee amounted to a penalty and was not a valid “liquidated damages” provision.3 It would appear that most courts would uphold the validity of nonrefundable amounts that can be justified on the basis of actual cost or expense. For example, one court concluded that forfeiture of tuition by a student who voluntarily withdrew from a private academy was justified since the academy had demonstrated that it had purchased supplies and employed teachers based upon the expectation of receiving tuition from the student.4
A school that dismisses a student for failure to pay tuition may itself be breaching the enrollment contract and losing its legal right to claim any tuition. One court suggested that the school should retain the student under such circumstances and sue for the tuition.5
For related information on this topic see the following articles:Incorporation and Tax Exemption of Private Religious Schools
Proof of Nondiscrimination in Private Schools
Right to Attend Private Schools
The Distinction Between Public and Private Education
Discharge and Discipline of Students of Private Schools
Discharge and Discipline of Teachers
Application of Federal Labor and Discrimination Laws to Private Schools
Government Regulation of Private Schools
Zoning Laws and Private Schools
Safety and Health Regulations for Private Schools
Taxation of Private Religious Schools
Child Abuse Reporting Requirements for Private Schools
Legal Liability for Student Injuries