Big state university considers 'college bankruptcy,' showing liberal arts schools aren't the only ones in trouble



AP/Kerry Maloney

LSU just announced the creation of a bankruptcy plan, as proposed budget cuts threaten to cripple the university.

Proving it's not only small, private, liberal-arts colleges that are susceptible to financial distress, Louisiana State University (LSU) announced that it's in the midst of drawing up a financial exigency plan.


Bloomberg News, which reported the development, called the plan "equivalent to a college bankruptcy" and noted that it would let LSU fire tenured faculty and restructure its finances.

The Baton Rouge-based university with over 30,000 students is drafting the plan, in part, because the most recently proposed budgetary cuts by Louisiana Governor Bobby Jindal threaten to severely impact the higher-education system in the state. The governor's plans would cut the budgets for Louisiana's colleges and universities to the tune of 82%, according to Bloomberg.

The president and chancellor of LSU, F. King Alexander, stressed the bankruptcy plan was essential since there has been little movement in the state's legislature to make updates to the budget.

"We don't say that to scare people," Alexander was quoted as saying in The Times-Picayune. "Basically, it is how we are going to survive."


The news comes as a stark reminder that many institutions of higher education aren't safe from financial distress. Recently, the discussion has centered around small, private colleges that have faced financial distress and have had to either shutter their doors or ramp up tuition spending.

Sweet Briar College, an all-women's private college in Virginia, shocked the higher education community in March with the announcement that it would be closing their doors for good after the spring semester. Vocal opponents have banded together to fight the decision, but it's still unclear whether the school will be around to see the fall semester.

The larger debate over the future of small colleges has been ramping up over the past few years, with Mark Cuban as a vocal participant in the conversation warning of a "student loan bubble." After Sweet Briar's announcement, Cuban tweeted: "This is just the beginning of the college implosion."

Cuban points to the rising cost of college tuition, and the ability of students to take out loans in excess of what they can reasonably be expected to repay. "There's a growing education bubble, with rising tuition and students taking out loans they might not be able to pay back," Cuban told Business Insider in March.

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