A California court on Friday rejected a request by the state's attorney general, Kamala D. Harris, who had sought an injunction to require Corinthian Colleges to disclose more information to prospective students about the company's dismantling. The filing was an addition to a larger lawsuit Harris previously filed against the for-profit chain. That legal challenge includes a wide range of allegations about deceptive marketing and job placement claims. The Superior Court of San Francisco is slated to consider the lawsuit in August.
The U.S. Department of Education failed to reach an agreement with Corinthian Colleges on how to sell or close its 107 campuses, the department said Wednesday. The two sides last month agreed to an initial plan, through which the feds released held financial aid payments to the cash-starved for-profit chain. Announcements of that deal said negotiators would finalize the phasing-out arrangements for Corinthian by July 1. The department said yesterday that the plan remained due by that date.
“While we did not reach an agreement yet with Corinthian officials, we are optimistic that further conversations with the company will produce an acceptable plan in the next few days that protects the interests of students and taxpayers,” said Ted Mitchell, the under secretary of education, in a written statement.
The company said in a statement it continues to work cooperatively with the department and that they expect to have an agreement completed in the next few days.
Mitchell told reporters Wednesday afternoon that there were “no immediate consequences” for missing the July 1 deadline.
“We extended the MOU under which we were operating with them,” he said. “We’re doing a day-by-day extension.”
(Note: this story has been updated to include additional remarks from Mitchell).
(Note: A spokeswoman for the Education Department said Tuesday morning that the deadline remains in place and that the plan is due today.)
The U.S. Department of Education apparently has revised its July 1 deadline to reach an agreement with Corinthian Colleges on a plan to sell or close the for-profit chain's 107 campuses and online programs.
Corinthian is facing a severe cash crisis, due in part to a freeze the department last month put on the company's federal aid payments. Then, on June 23, the feds and Corinthian announced a short-term deal, through which the company received $16 million in released payments in exchange for agreeing to work on a phasing-out plan. However, an announcement on the department's website about that preliminary agreement has now been edited, having dropped "no later than July 1" for the final plan's deadline.
"Corinthian is expected to submit details of the plan to the U.S. Department of Education," the statement now says, "and we will update this announcement with the details of the plan in the near future."
The new ambiguity about Corinthian's fate is certain to draw criticism from consumer advocates, California's attorney general and a dozen Democratic U.S. senators, who have called for a halt to the company's recruitment and enrollment of new students. The department, however, has said it is seeking to minimize disruption to Corinthian's 72,000 students. The for-profit said it would struggle to find buyers if new enrollments are suspended. In addition, the federal government could lose as much as $1.2 billion on students' discharged loans if Corinthian shuts down.
The company also announced on Monday that its creditors had freed up an additional $9 million in funding. The banks had held that money after the department froze its payments.
Corinthian owns the Heald College, Everest and WyoTech chains. Experts have said that Heald, which holds regional accreditation, is likely the most valuable to a potential buyer. In a corporate filing Monday the company said its board had voted to sell Heald. The chain enrolls about 13,000 students at its 12 campuses, which are located in California and in other Western states.
Eleven Democratic Senators joined Sen. Dick Durbin of Illinois in calling on the U.S. Department of Education to freeze new enrollments at Corinthian Colleges' 107 campuses. The for-profit chain is currently negotiating a plan to teach out or sell its Heald College, Everest and WyoTech brands. The group of senators also asked the department to prevent any for-profit that is facing state or federal investigations to participate in the phasing-out of Corinthian's campuses.
There is a pattern of dishonesty taking place in some of the criticism of for-profit colleges. Too frequently, opponents of the sector take advantage of students and use an individual as a “straw man” to try to prove a point about student debt and tuition.
It is an attack by anecdote. Or more precisely, attack by false and partial anecdote.
The latest example is a filing from the Education Trust on the U.S. Department of Education’s proposed “gainful employment” (GE) rule. The rule would impose strict loan default and debt-to-earnings standards on private-sector colleges that would close the door to higher education opportunities for hundreds of thousands of minority and low-income students.
In their filing, the Education Trust references by first name an anonymous student from Kaplan University, using a quote from her as firsthand evidence of someone allegedly burdened by debt because of high tuition.
We know the student’s full story -- and, not surprisingly, the allegation is untrue. The quote claims that “tuition … ate up” the student’s financial aid. In reality, Kaplan University’s average actual cost is less than most private, nonprofit colleges and many tax-supported public institutions. This student came to Kaplan with significant debt incurred elsewhere -- including a nonprofit institution whose tuition is significantly greater than ours.
It was also alleged that we “maxed out her loans.” In reality the Education Department requires institutions to allow students to borrow up to the maximum amount for which they qualify. To cover personal expenses, students can take on debt far in excess of what is needed for tuition. Under the law, we cannot limit this. Particularly in non-residential, adult-serving institutions, these dollars do not stay with us -- the funds go to the student to cover his or her living expenses. Student academic success, such as the need to repeat failed courses, will also impact total cost and debt.
Sometimes, purveyors of these testimonials disclose full names. When a group calling themselves the “Young Invincibles” took to Capitol Hill last month to talk about student debt, it brought along 28-year-old Dymond Blackmon, who said he had incurred $90,000 in debt from pursuing an associate degree. Flanked by four U.S. senators, he said he did not make enough money to pay back loans from his photography program. As reported by Inside Higher Ed, the institution Blackmon attended had tuition and fees of $14,000 a year. Clearly, there’s more to the story than the tuition charged by his institution.
For most students, completing college takes a lot of work and often does not go as planned. Some students take on debt at multiple institutions, need to repeat courses extending their course of study, or borrow more than needed. These details are rarely acknowledged, and those that put the spotlight on these individuals know the schools are prohibited by law from discussing a student’s details and, to protect our students, we are loath to do so.
Student loan debt is a problem. But solving it will require more than finger-pointing.
Policy should permit schools to limit loans for a particular course of study, helping us align debt with expected earnings in the field. College can be made more affordable if student loans are managed, in part, by people who share a big stake in seeing their students succeed -- the schools in which they enroll.
Using misleading anecdotes may be a clever way to make an argument, but it doesn’t help illuminate the issue. Permitting colleges to help manage borrowing is the real issue here, and it is no straw man.
Corinthian Colleges announced on Monday that it had reached an agreement with the U.S. Department of Education that is designed to keep the for-profit chain afloat long enough to sell off and shutter its campuses in an orderly fashion.
The struggling Corinthian faces a dire cash shortage, due in part to decision by the feds last week to put a 21-day hold on payments for federal financial aid and grants. While the hold remains in place, the department agreed to release $16 million in payments immediately. That was the minimal amount necessary to keep Corinthian from going bankrupt this week, according to a corporate filing.
Last month the company said it was considering "strategic alternatives" such as the sale or merger of some of its operations. That process appears to have progressed, according to the preliminary terms of a transition plan Corinthian is working on with department. The company agreed to hire an outside monitor as it seeks to sell or "teach out" its 107 campuses within about six months.
Corinthian owns Heald College, WyoTech and the Everest College and University chains. It enrolls 72,000 students. The company will continue to enroll new students under the agreement. However, Corinthian agreed to freeze enrollments at institutions it is closing down, once the company and the government determine which campuses those will be.
"Throughout several days of intensive discussions with the department, our goal has been to protect the interests of our students, 12,000 employees, taxpayers and other stakeholders," said Jack Massimino, the company's chairman and CEO, in a written statement.
The department said it put a hold on Corinthian's federal payments because the company had been slow to respond to several information requests over concerns about the company's marketing practices. Corinthian agreed on Monday to provide the outstanding information in a timely manner.
The National Consumer Law Center, a nonprofit group, on Wednesday released a report calling for tighter state regulation of for-profit institutions. Federal crackdowns, such as proposed "gainful employment" standards, will not be strong enough to prevent deceptive practices in the sector, according to the report. The group's recommendation's include a call for states to stop relying on regional accreditors to vet for-profits, and for state agencies to instead set their own minimum standards.
San Francisco's city attorney, Dennis Herrera, on Tuesday announced a $4.4 million settlement with Education Management Corporation (EDMC). Herrera's office had been investigating the student-recruiting tactics of the California Art Institutes, which EDMC owns. The for-profit chain did not admit wrongdoing as part of the settlement, according to a corporate filing. It will pay roughly $2.5 million in scholarships for past and present students at the local Art Institutes. The rest of the settlement amount will cover Herrera's costs for the investigation. The company also reached a voluntary agreement to provide more public information about its programs, such as job placement and graduation rates.
The office of Florida's attorney general, Pam Bondi, announced on Tuesday that it had concluded a three-year investigation into the recruiting and enrollment practices of Kaplan Inc., a for-profit chain. The investigation, which focused on other for-profits as well, found no violations by Kaplan, according to a statement from the company. Kaplan also voluntarily reached an agreement with Bondi's office, under which it will disclose more details about academic programs. The company will also reimburse the attorney general's office for fees it racked up during the investigation.