[Editor's note: On October 29, 2025, the Higher Education Inquirer emailed South University for a status update. South University did not respond.]
South University, a former for-profit college network now operating under nonprofit ownership, is facing a $35 million balloon payment this month on a loan obtained through the Federal Reserve’s Main Street Lending Program. The looming debt and the school’s status on Heightened Cash Monitoring (HCM) raise questions about financial stability and the adequacy of regulatory oversight in the nonprofit higher education sector.
A Heavy Loan Load
According to publicly available financial statements, South University carries more than $35 million in long-term debt maturing this month, part of a $50 million Main Street loan issued during the COVID-19 pandemic. The approaching balloon payment represents a major financial test for an institution already under federal scrutiny and struggling with declining enrollment.
Heightened Cash Monitoring—But Limited Oversight
South University is currently listed under Heightened Cash Monitoring (HCM) by the U.S. Department of Education, a status that requires extra documentation before federal aid funds are released. While the designation signals potential financial or compliance issues, it does not necessarily result in strong day-to-day oversight.
The school remains accredited by the Southern Association of Colleges and Schools Commission on Colleges (SACSCOC)—an accreditor known for minimal intervention in institutional finances unless there is clear evidence of collapse. This means that despite the HCM flag, South University continues to operate with significant autonomy, even as federal and student aid dollars flow through additional administrative checks.
A Complicated Legacy
South University’s story is deeply tied to the rise and fall of the for-profit college industry. Once part of Education Management Corporation (EDMC), the school was sold in 2017 to the ill-fated Dream Center Education Holdings (DCEH). When DCEH collapsed in 2019, the Education Principle Foundation (EPF)—a nonprofit—took over South University and The Art Institutes. South University is now an independent non-profit enterprise.
A Pattern of Fragile Conversions
South University’s precarious position reflects a larger trend: the conversion of failing for-profit schools into nominal nonprofits that rely on tuition, federal aid, and private service contracts to survive. These conversions often preserve the same management structures and business practices while benefiting from the public trust and tax advantages of nonprofit status.
The $35 million balloon payment highlights the risks of these financial engineering strategies—especially when public money is involved but public accountability is weak.
What Comes Next
With the 2025 deadline approaching, South University faces a pivotal decision: refinance the Main Street loan, restructure operations, or seek new capital through other partners.
If the institution falters, students could once again be caught in the aftermath of a sector-wide collapse—echoing the failures of EDMC, DCEH, and the Art Institutes.
For now, South University continues to operate with limited transparency, under a light-touch accreditor, and with a multimillion-dollar federal debt hanging over its future.
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