`

For-profit college operator Corinthian calls it quits

April 28, 2015

Corinthian Colleges Inc. shut down its remaining 28 for-profit career schools on Monday, ending classes for about 16,000 students, essentially finishing the biggest collapse in U.S. higher education.

Corinthian—which once competed nationally with the country's biggest for-profit education companies, including Carmel-based ITT Educational Services Inc.—owns Everest College, Heald College and WyoTech schools. It said it will work with other colleges to try to place the students.

Corinthian fell apart last summer after the U.S. Education Department curtailed its access to federal student aid. In November, the Santa Ana, California-based company agreed to sell half of its 107 campuses to Education Credit Management Corp., a not-for-profit organization specializing in student-debt collection, amid allegations that Corinthian falsified grades, attendance and job-placement rates.

The 20-year-old company also closed several Everest campuses last year, including one in Indiana.

“What these students have experienced is unacceptable,” Education Under-Secretary Ted Mitchell said in a written statement. “As Corinthian closes its doors for good, the department will continue to keep students at the heart of every decision we make.”

Corinthian stock, which once traded for more than $33 per share, was selling for a penny Tuesday morning.

Reaching out

The department will begin reaching out to Corinthian’s students to review their options, including the possibility of loan discharges, Mitchell said.

State attorneys general from Massachusetts to California have accused Corinthian of targeting low-income people like welfare recipients and single mothers and saddling them with debt on empty promises of lucrative careers in medical assisting and criminal justice. The company has denied wrongdoing.

“We have attempted to do everything within our power to provide a quality education and an opportunity for a better future for our students,” Jack Massimino, chief executive officer of Corinthian, said in the statement.

A group of former students, calling themselves the Corinthian 100, have vowed to stop repaying their federal loans. The Education Department said it will consider debt forgiveness for students who can show they were defrauded by the schools.

‘Rotten company’

Corinthian, ITT Educational and other for-profit college companies have been under increased scrutiny and tighter regulation in recent years.

“Finally, we see the end of this rotten company,” Sen. Dick Durbin said in a statement about Corinthian. The Illinois Democrat has been calling for Corinthian to cease new enrollments since last summer. “These students shouldn’t be on the hook for the debt they were misled into taking on.”

Corinthian was ordered April 17 to stop enrollments in California, where most of the schools are located. It was also fined $30 million by the Education Department for misrepresenting job-placement rates to attract students at its Heald business schools. Efforts to sell Heald were unsuccessful, the company said on Sunday.

Corinthian’s California schools weren’t part of the sale to Education Credit Management, because the state’s Attorney General Kamala Harris refused to waive liability for new owners, preferring to pursue restitution for students.

The school operator has been under investigation by 20 states, was sued by the Consumer Financial Protection Bureau and is facing three federal criminal probes.

The schools, mainly located in strip malls and office parks, had 72,000 students last summer, before the Education Department actions. Corinthian received $1.4 billion in federal student aid in 2013 alone.

“For too many students, Corinthian turned the American dream of higher education into stories of financial despair,” Rohit Chopra, student-loan ombudsman for the Consumer Financial Protection Bureau, said in a statement. “We continue to urge borrowers to submit complaints with federal agencies.”

Costly closure

The abrupt closure may cost U.S. taxpayers more than $200 million in canceled student loans. Forgiving their debt, if all its students request it, would cost the government about $214 million, according to Denise Horn, an Education Department spokeswoman.

When a college closes, enrolled students are eligible to have their federal loans discharged, under certain circumstances. Some Corinthian students who are able to finish their degrees by transferring into other programs may not qualify to have their loans canceled, said Daniel Hanson, an analyst with Height Securities in Washington, D.C.

“The principal focus for the Education Department right now is to make sure students left out in the cold find their way into other institutions,” he said in a telephone interview.

The Education Department will help Corinthian hold “transfer fairs,” and will contact Corinthian’s students to point them to information about schools where they can continue pursuing education, Horn said by e-mail. Education Department officials will immediately begin advising students at the closed schools of their options, Education Undersecretary Ted Mitchell said Monday in a statement.

ADVERTISEMENT

Recent Articles by Bloomberg News

Comments powered by Disqus