With fall open houses and visits from prospective students well under way, it is time for schools to plan ahead and take a fresh look at their enrollment contracts. A well-drafted enrollment contract not only confirms the tuition obligation; it will clearly define the relationship between school and family and provide strong enforcement tools. Before you start your school's contract review for the 2020-2021 school year, consider these top tips and common trouble spots.
Perpetual Enrollment Contracts
Many schools have moved from annual enrollment contracts to perpetual (or evergreen) enrollment contracts, which allow schools to automatically re-enroll students for the following school year unless their parents notify the school of their decision not to return by a certain date. A perpetual contract can be appealing, as it decreases the administrative burden of obtaining a new enrollment contract each year, and may even help schools with student retention and planning for the coming year. Schools considering perpetual contracts should ensure that they are drafted carefully to avoid potential pitfalls. For example, you will need to consider such circumstances as the following: families seeking to withdraw after yearly tuition is announced, accurately reflecting changes in tuition and school policy from year to year, and terminating an enrollment contract for a family that may not be invited to return.
Standards of Conduct
A well-drafted enrollment contract should provide the school with the ability to remove a student for failure to follow school policies without forfeiting tuition. In addition, an enrollment contract can and should include clear guardrails for families regarding school policies and standards of conduct that can help a school navigate challenging situations that may arise throughout the school year. An enrollment contract should not only refer to the parent handbook; it should also state that the school reserves the right to remove a student based on the conduct of a parent or another adult. Similarly, contract language may hold parents or guardians responsible for certain financial obligations, including legal fees, if the school must get involved in a divorce or custody dispute.
Electronic Contracts and Signatures
Obtaining signatures on paper contracts places a large administrative burden on schools. If you haven't already, consider taking the enrollment contract online. There are plenty of benefits to doing so, not the least of which is reducing time spent tracking down paper agreements. If your school has already taken its contract online or is considering doing so, it is important to implement the following practices to ensure your agreement is binding and enforceable:
- Require each signatory to create a separate user name and password to log in.
- On the welcome screen, require signatories to acknowledge that their electronic signatures are binding.
- Use two methods for the signatory to indicate acceptance of the contract (e.g., by typing their name and then clicking "I Accept").
- Provide the signatory an opportunity to request a paper contract in lieu of an electronic one.
- Provide an opportunity to cancel the online enrollment process prior to completion.
- Ensure that signatories can download, print, or be emailed a copy of the final, signed contract.
- Make sure that your enrollment contract software maintains an electronic "paper trail" documenting the electronic signature process (e.g., by tracking the IP address of the signatory and date/time stamping the signature).
Withdrawal and Cancellation
Clear language regarding the school's ability to enforce the financial obligation in the event of a student's withdrawal or dismissal prior to the end of the contract term is a key component of the enrollment contract. On this point, some courts have even waded into the discussion, establishing further parameters for when the court will (and will not) enforce a parent's obligation to pay tuition after cancellation or withdrawal. Schools should carefully draft these provisions to be compliant with state law, but also clearly and unambiguously outline the circumstances under which they will refund the deposit, refund tuition paid, and/or consider any waiver of the continuing tuition obligation.
The Truth in Lending Act
Often overlooked is the potential applicability of the Truth in Lending Act to a school's enrollment contract. Generally speaking, when a school charges a finance charge or permits a tuition payment plan of five payments or more, the school will need to provide a Truth in Lending Act disclosure to parents at the time they are completing the enrollment contract. It is important to review your school's contract to determine whether such disclosure is required.