The enforcement decree for the Private University Structural Reform Act was approved at the August 4 Cabinet meeting.
Headlines about “eliminating zombie universities” appeared everywhere.
But for someone attending one of those universities, the question is different.
3-line summary
1. Starting August 15, procedures for closing private universities will be set out in law.
2. Students who forgo transferring will receive a compensation payment for discontinuing their studies.
3. The criteria for determining a management crisis have not yet been released.
If Your School Closes
First, students are transferred to another school. When a university closes, it identifies transfer openings at nearby universities with the same or similar departments and notifies the remaining students. This is called a special transfer admission, a system that has been in place since 2012.
What matters is that the opportunity is not limited to one time. It is offered twice each semester, four times a year. This is intended to ensure that students serving in the military or on leave of absence do not miss it.
What is new in this enforcement decree comes next. If you decide not to transfer, you receive money. Its formal name is a compensation payment for discontinuing studies, and it is, literally, compensation for having to stop your studies. It is paid within the amount remaining after the school’s assets are liquidated.
Until now, transferring was effectively the only option. If there was nowhere to continue the major, if the school was too far from home, or if the student had already found a job, their enrollment status simply disappeared.
The issue of academic records has also been addressed. Even after a school closes, students can obtain transcripts and graduation certificates. The Korea Foundation for the Promotion of Private School handles records transferred from closed universities and operates an integrated issuance service. Students can obtain 11 types of documents, while professors and staff can obtain three types, including certificates of teaching experience.
In What Order Does a School Close?
It does not close overnight. There are stages.
Assessment. The Korea Foundation for the Promotion of Private School examines the university’s financial condition. It may also conduct a fact-finding investigation if necessary.
Designation. The Ministry of Education reviews the results and designates the institution as a university in management crisis. The designation can also be lifted if conditions improve.
Order. A designated university receives a structural reform order. It is notified in writing of what must be done and by when, and submits a results report once completed.
Suspension of admissions, then closure. If recovery is deemed difficult, it is barred from admitting new students, and ultimately closes.
According to an Edaily report, 15 to 20 universities each year fail to fill even 80% of their freshman enrollment quota. When students do not enroll, tuition revenue does not come in, and schools that rely entirely on tuition simply continue accumulating losses. Until now, they could remain in that condition for years because there was no procedure for closing them.
That is why the term “zombie university” has been attached. It means a condition in which education is not functioning properly, yet the institution does not close. The harm has generally flowed in one direction. Even as laboratory equipment aged, the number of full-time faculty declined, and scholarships were cut off, students admitted to those schools still had to attend for all four years.
Why Give Money to the Side That Is Closing?
This is the most debated part of the new enforcement decree.
A dissolution settlement payment has been introduced. If a school corporation dissolves voluntarily, it may pay the founders’ side from the remaining assets, within 15% of the portion that would otherwise go to the national or local government.
There is room for the objection that assets contributed for educational purposes should not be returned. The logic on the other side is this: if they cannot recover even a single won, no one will voluntarily close, and then only students will continue to remain.
Conditions have been attached, however. If an executive has committed a serious legal violation, such as breach of trust or embezzlement, within the past 10 years, they cannot receive a single won. The decree also blocks routes for circumventing this rule by transferring assets to a public-interest corporation run by relatives.
Faculty and staff may also receive dismissal compensation or retirement consolation payments within the remaining assets.
Giving Breathing Room to Schools That Endure
It is not only about closing schools. Regulations will be eased for universities carrying out structural reform.
Standards applied when selling real estate they own will be relaxed, and reserve funds that had been restricted to specific uses can be used for structural reform. The faculty staffing ratio requirement will be eased by up to 30%.
The law stands on two legs: save institutions that can be saved, and wind down those that cannot.
The Blank Spaces That Remain
Even with the enforcement decree in place, some gaps remain unfilled.
The biggest is the financial criteria for distinguishing universities in management crisis. The enforcement decree does not specify thresholds such as how much debt, or how far below what enrollment rate, would constitute a crisis. This is what experts described as “steamed buns without filling” in an Aju Business Daily report.
It has also not yet been determined who assumes existing debt and contracts when universities merge, or whether faculty and staff employment will be transferred.
The absence of criteria also means that no institution has yet been designated. Even when the law takes effect on August 15, a list will not be released that same day.
What to Check Now
For currently enrolled students, their school’s financial condition is already public. On University Information Disclosure, enter the school’s name to see year-by-year debt, reserve funds, and freshman enrollment rates. Whether the enrollment rate has been declining for several years is the easiest signal to identify. Look at a three- to five-year trend, not a single year’s number.
If you are considering a transfer, the items to secure now are your transcript and course-completion records. How many credits are recognized determines how many semesters remain after the transfer.
The name of this law includes “structural reform,” but reading the enforcement decree shows that half of it is a procedure for closing schools. The inclusion of provisions for students is what differs from the past.
Who will actually be subject to it can only be known after the criteria are released.
References
- Herald Business ‘Empty Classrooms, Zombie Universities’ Can No Longer Hold On… Private University Structural Reform Enforcement Decree Approved
- Aju Business Daily Enforcement Decree for the Private University Structural Reform Act Approved, but Substantive Requirements Such as Management-Crisis Criteria and Debt Succession Are Missing
- Edaily University Restructuring Gains Momentum… Private Universities in ‘Management Crisis’ May Face Admissions Suspension and Closure
- Education Press [Chang] Dissolution Settlement Payments to Be Made to Corporations Upon Closure… Enforcement Decree for the Private University Structural Reform Act Approved
- Korea Foundation for the Promotion of Private School Current Status and Tasks of Policies for Closed Universities
This article is informational and summarizes the contents of the enforcement decree. For the designation status of an individual university or your eligibility for transfer or compensation, please check announcements from the Ministry of Education and your university.