Corinthian vs. California

As the campaign for debt relief for its students mounts, for-profit Corinthian Colleges tries to pressure California's attorney general to ease her scrutiny as the chain seeks buyers for its campuses in the state.

April 10, 2015

Corinthian Colleges, the embattled for-profit education company, is going on the offensive in California as it looks to sell its remaining campuses that continue to enroll thousands of students. 

The company has accused state Attorney General Kamala Harris of preventing the sale by making “unreasonable demands” of potential buyers. And it’s pressing her to reverse her decision to hold any future owners of the campuses liable for the state’s lawsuit against Corinthian -- a requirement it claims is scaring off interested buyers.

Corinthian is encouraging its California-based students and employees to sign a petition and organizing rallies outside the attorney general’s San Francisco and Sacramento offices on Friday.

As part of an agreement with the U.S. Department of Education, Corinthian has continued to operate its California campuses as it looks for someone to purchase them. But if it can’t secure a buyer within the next several weeks, the college says, it will be forced to close its campuses in the state.  

That would open yet another unprecedented chapter in the dismantling of Corinthian that federal officials have overseen since last July. A sudden closure of Corinthian’s remaining campuses would leave the Education Department on the hook for the federal loans of thousands of students.

At the same time, department officials are also deciding how to respond to growing pressure to provide debt relief to former Corinthian students across the country. On Thursday, nine state attorneys general called on the department to make it easier for those former students to have their federal loans canceled.  

Remaining Operations In Limbo

The 53 Corinthian campuses purchased earlier this year by E.C.M.C. Group represented a large proportion of the college’s operations, but not all of them.

Although often characterized in news reports as “defunct,” Corinthian Colleges in fact still has tens of thousands of students who continue to receive millions of dollars in federal grants and loans.

The majority of the remaining campuses are in California, where most operate under the Heald College brand. Heald’s 10 California campuses and 2 Hawaii and Oregon locations currently have about 9,000 students, according to Joe Hixson of the Abernathy MacGregor Group, a public relations firm that represents Corinthian.

Hixson declined to provide the total number of locations that the college is currently operating across the country.

Federal records show that of the campuses Corinthian agreed to sell but that were not part of the E.C.M.C. purchase, 26 were eligible for Education Department funding as of last week. That number includes the California campuses as well as three locations in Rochester and Phoenix that E.C.M.C. has said it wants to buy.

Students at those campuses collectively received more than $60 million in Pell Grants and about $56 million in federal loans during the last six months of 2014, according to an Inside Higher Ed analysis of federal data.

Trouble Finding a Buyer

Corinthian’s Heald campuses in California have several prospective buyers, Hixson said. But he added that having to assume liability for the attorney general’s current lawsuit is a deal breaker.

It doesn’t appear, though, that the attorney general plans to back down any time soon.

“Our litigation with Corinthian is ongoing but our approval is not required for the sale of the college,” said Kristin Ford, a spokeswoman for the attorney general. “We will continue to act aggressively to pursue relief and restitution for students at Heald and other Corinthian Colleges, Inc., campuses.”

E.C.M.C. is one of the prospective buyers eyeing the Heald locations, according to a person familiar with the negotiations.

Dave Hawn, the C.E.O. of E.C.M.C., said in an email that he could not comment on the matter because Corinthian was “using a confidential process” to sell its Heald campuses.

It’s not clear, though, what will happen if Corinthian is unable to find a buyer for its remaining campuses. Ted Mitchell, the under secretary of education, told congressional lawmakers in February that the department would not allow Corinthian to “operate indefinitely.”

He said at the time that the department would make a decision on how to handle the situation “in the coming weeks.”

Growing Pressure for Debt Relief

Separately on Thursday, a group of nine attorneys general, all Democrats, urged Education Secretary Arne Duncan to “immediately relieve” the debt of loan borrowers who attended colleges, like Corinthian Colleges, that are accused of violating state laws.

The attorneys general of California, Connecticut, Illinois, Kentucky, Massachusetts, New Mexico, New York, Oregon and Washington all called on the Education Department to make it easier for borrowers to assert state-level claims against a college as a defense to having to repay their loans. 

The letter echoes the calls of consumer advocates, Senate Democrats and a group of activists who are on a debt strike and refusing to repay the federal loans they took out to attend Corinthian campuses. They are pushing the department to use a little-known provision of federal law that allows borrowers to cite a college's misconduct as a reason why they shouldn't have to repay their loans. 

Denise Horn, a department spokeswoman, said in a statement that "the Department shares the attorneys general's concern for the welfare of Corinthian students and we look forward to responding to their letter."


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