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Financial diagnosis framework for private universities / Ministry of Education

The Ministry of Education has cracked down on insolvent universities facing management crises. In conjunction with the Private University Structural Reform Act—enacted on the 15th to support voluntary rehabilitation or closures for universities facing financial distress—this measure exerts double pressure on insolvent universities on the verge of closure.

On the 24th, the Ministry of Education announced 20 universities subject to restrictions on government student financial aid for the 2027 academic year based on university institutional accreditation and private university financial diagnosis results. The full list of 308 institutions was released, comprising 16 universities under "full restriction," where both national scholarships and student loans are completely blocked, 4 universities under "partial restriction," where only general repayment loans are permitted, and 288 eligible universities.

Universities that fail to obtain accreditation are placed under full restriction regardless of their financial diagnosis results. Even if accredited, institutions categorized as "universities in management crisis" through financial diagnosis face partial restrictions. Because this structure applies two standards simultaneously, passing just one is not enough to avoid penalties.

Notably, the number of unaccredited universities has increased for two consecutive years. A Ministry of Education official explained, "There has been no change in the evaluation process itself," adding, "It is simply that slightly more universities failed to meet the criteria as we classified them by reflecting the financial diagnosis results together." This indicates that rather than the evaluation criteria becoming stricter, the number of insolvent universities itself is growing.

This announcement carries even greater weight as it coincides with the enforcement of the Private University Structural Reform Act. The act was enacted to support the voluntary rehabilitation or orderly exit (closure and dissolution) of private universities and school foundations suffering from financial crises due to a sharp drop in the school-age population, while protecting students, faculty, and staff.

An official explained, "This financial diagnosis was conducted before the law took effect, so it is not subject to direct application," adding, "However, among the universities designated as facing a management crisis, those wishing to close down voluntarily can receive support under the Private University Structural Reform Act."

In effect, the government has presented both the pressure tactic of restricting student financial aid and an exit route through voluntary closure at the same time. Indeed, the list of fully restricted universities includes institutions that are already undergoing closure procedures or preparing for mergers, demonstrating that restructuring has already become a reality. As the decline in the school-age population combines with financial difficulties, government pressure on universities pushed to their limits is expected to intensify further.

By region, the restricted universities are concentrated almost entirely outside the capital area. None of the 16 fully restricted universities are located in Seoul, being scattered across various regions nationwide, including North Gyeongsang, South Jeolla, North Jeolla, South Chungcheong, North Chungcheong, Busan, Jeju, and Gangwon. Among the 4 partially restricted universities, all except Chugye University for the Arts in Seoul are located in regional areas. As the decline in the school-age population hits regional areas earlier and more steeply than the capital area, regional universities are the first to suffer both in terms of new student recruitment and financial conditions.

Lee Hae-sook, head of the Higher and Lifelong Education Policy Bureau, urged, "We strongly encourage test-takers and parents preparing for university admissions to thoroughly check the list of universities eligible for student financial aid and those subject to restrictions for the 2027 academic year before making their final choice of school."

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/ Ministry of Education

                                                                                                             Park Ji-sook