Corinthian Closes for Good

The for-profit college says it's immediately ending operations at its remaining campuses, interrupting the studies of some 16,000 students and possibly sticking the government with a bill for discharged loans. 

April 27, 2015

After teetering on the brink of collapse for months, Corinthian Colleges announced Sunday that it will immediately shut down its 28 remaining campuses, which together enroll approximately 16,000 students.

The closures, which take effect Monday, come after the embattled for-profit college chain was unable to finalize the sale of its campuses and had also been ordered by federal and state regulators to stop enrolling students at some locations.

Corinthian’s decision to immediately shutter its campuses may also cost taxpayers tens of millions of dollars, as the U.S. Department of Education has to forgive the federal loans of students who do not continue their studies elsewhere.

The company and federal officials said they are both working with other colleges to help the roughly 16,000 displaced students find educational offerings near their locations. In addition to directly emailing students about their options, the Education Department said it will deploy federal personnel to some of the campuses to counsel students in person. 

The closures affect Corinthian campuses in five states -- Arizona, California, Hawaii, New York and Oregon -- that do business under the brand names Heald College, Everest and WyoTech.

In a statement, Jack Massimino, the chief executive officer of Corinthian Colleges, blamed “the current regulatory environment” for not allowing the company to complete a sale of its campuses with “several interested parties.”

The company said that “advanced negotiations” to sell Corinthian-owned Heald College were “unsuccessful largely as a result of federal and state regulators seeking to impose financial penalties and conditions on buyers and teach-out partners.”

California Attorney General Kamala Harris, who is suing Corinthian for predatory practices, has declined to waive legal liability for any new owners of the company’s campuses. 

“We made every effort to address regulators’ concerns in good faith,” Massimino said. “Neither our Board of Directors, our management, our faculty nor our students believe these schools deserved to be forced to close.”

Ted Mitchell, the under secretary of education, said in a blog post Sunday that “the closure decision was made by the company.”

“What these students have experienced is unacceptable,” Mitchell added in a statement. “We look forward to working with Congress in an effort to improve accountability and transparency in the career college industry.”

The closure of the last of Corinthian’s campuses ends one chapter in the unprecedented collapse of what was once one of the nation’s largest college chains, with about 72,000 students last year. But a slew of questions still remain, as the company continues to face legal and regulatory challenges.

Earlier this month, the Education Department slapped Corinthian with a nearly $30 million fine, accusing the company of misrepresenting job placement rates. The company disputes the allegations and says it is contesting the fine.

Department officials are also grappling with how to deal with debt relief for former Corinthian students.

Student activists, with the support of some Senate Democrats and state attorneys general, have been asking the department to employ a virtually unused provision of federal law that allows borrowers to assert a college’s misconduct as a reason why they don’t have to repay their loans.

Department officials haven’t yet said how they’re going to respond to those claims for debt relief. Education Secretary Arne Duncan said last week that loan forgiveness for those students was still on the table.

Large Cost to the Feds?

By contrast, the approximately 16,000 current Corinthians students at campuses being closed Monday will have a separate and more commonly used path to loan forgiveness -- but it could come with a large price tag for taxpayers. 

Unless they decide to transfer their Corinthian credits to another program, the students will generally be eligible for a “closed school” discharge, for which the Education Department has established procedures.

The cost to the federal government of wiping out large swaths of federal loans was one reason why officials said they rushed to avoid Corinthian’s closure last summer when the company was on the brink of insolvency.

In defending their decision to approve the sale of much of Corinthian to ECMC Group, over the objections of some liberal groups and consumer advocates, department officials cited, among other things, the cost of federal loan discharges.

It’s not clear how much the Monday’s closure of 28 campuses will cost taxpayers in loan discharges. But it could be as much as tens of millions of dollars.

Students at the Corinthian campuses now being closed took out at least $56 million in federal loans during the last six months of 2014, according to an Inside Higher Ed analysis of federal records.

Last year, department officials estimated that loan discharges at the Corinthian campuses sold to ECMC Group would have cost the government some $30 million had the sale not been completed. That figure was based on a 6 percent take-up rate for the 40,000 students affected by that sale choosing to have their loans discharged.

A spokeswoman for Corinthian declined to comment on the outstanding federal loan balances of the current 16,000 students. A department spokeswoman said she did not yet have an estimate for the potential cost of loan discharges.

Closure Cheered By Critics

Critics of for-profit colleges, who argue that Corinthian Colleges are emblematic of problems in the industry and how it is regulated, welcomed the news of the company’s demise on Sunday.

“Finally, we see the end of this rotten company,” Senator Dick Durbin of Illinois, a Democrat, said in a statement. “But there are still thousands of students who may never see the end of the damage Corinthian has caused if the Department of Education doesn’t move quickly to provide some relief.”

Lauren Asher, the president of the Institute for College Access and Success, said in a statement that it was “unconscionable that Corinthian was still enrolling new students and receiving taxpayer funding until just a few days ago, given the problems that have been evident for years.”

The Corinthian situation, she said, shows why “the federal government, states and accreditors need to be much more aggressive in holding schools accountable.” 


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