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For-profit education company warns it may have to shut down

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Corinthian Colleges, a for-profit education company with about 75,000 students nationwide, warned Thursday that it may fail as it clashes with U.S. regulators over student data.

Corinthian's problems come as student enrollment at schools run by for-profit education companies, including Carmel-based  ITT Educational Services Inc., have been dropping amid heightened government scrutiny of the industry's practices.

Earlier this year, the Consumer Financial Protection Bureau filed suit against ITT, alleging that it pushed students into high-cost private loans knowing they would likely default. The company denied the charges. Several state attorneys general are also investigating various for-profit education companies.

ITT stock fell 4 percent in early trading, to $16.50 per share. The stock has lost more than 50 percent of its value this year.

Santa Ana, Calif.-based Corinthian, which owns the Everest College, Heald College and WyoTech schools, said that the U.S. Department of Education has limited its access to federal funds after it failed to provide documents and other information to the agency.

That follows allegations that the company altered grades, student attendance records and falsified job-placement data used in advertisements for its schools.

Shares in the company plunged 67 percent, to 28 cents each, Thursday, the biggest drop since it began trading in February 1999. The stock has lost 84 percent of its value this year.

The Education Department said that it heightened its oversight of the company after requesting data "multiple times" over the past five months. Regulators have grown increasingly concerned about inconsistencies in its job-placement claims for graduates.

At Corinthian, the Education Department has now limited the federal student aid funds available to the school and is releasing those funds only 21 days after Corinthian submits student enrollment data, according to a Securities and Exchange Commission filing.

Those funds are available in most cases within one to three days.

The company said that it has sought, but has been refused, additional financing by its lenders.

It's unclear what would happen to its students. It has more than 100 campuses in the U.S. and Canada as well as online classes. Everest and Heald offer programs in the health care, business and computer technology fields. WyoTech trains students on motorcycle repair, automotive technology and air conditioner installation.

A spokesman at Corinthian declined to comment Thursday.

Jorge Rodriguez, 23, expects to graduate in April from a Heald campus in Milpitas, Calif. He said he likes his school, where he is studying to become a medical assistant or registered nurse, and that the program accommodates his part-time work schedule.

"We haven't heard anything of this," he said. But he called his adviser Thursday after reading an article about Corinthian's troubles. He said his adviser told him that the school's president would be available to answer Rodriguez's questions.

The Education Department's website says that students at schools that close before they complete their degree may be able to discharge federal loans. The department also works to find other options for students in order to finish their education.

According to the Education Department, Corinthian receives $1.4 billion in federal financial aid each year.

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  • They are not the same
    As a former employee of ITT Tech, for more than a decade, I can verify that they follow the rules. The always errored on the side of caution when it came to anything. In face, NO employees receive merit increases because of regulations imposed by the government. I actually attended classes at Ivy Tech and was significantly disappointed. To say that is a better school is inaccurate. If all of these schools close down, who will be left to educate the poor? We will simply spend our money on prisons instead of colleges.
  • ITT is a scam!
    As a former employee of ITT Tech, I can testify that the very selfsame fraud that closed Corinthian is going on daily at ITT Technical Institutes all over the nation. THEY need to be shut down too!
  • K-12 Charter schools should be next
    When are they going to start investigating Charter schools? Same business model, majority of them perform just as poorly.
  • As ye sow so shall you reap
    These type of schools are diploma mills and sell student debt as their primary purpose. Go Ivy Tech!

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