Corinthian’s Long Wind-Down

After spending half a billion dollars to keep former Corinthian Colleges campuses afloat, the nonprofit ECMC Group’s Zenith Education will close all but three.

November 9, 2017
 
Altierus Career College campus in Tampa Bay, Fla.

The long wind-down of Corinthian Colleges continued Wednesday with the planned closure of all but three of the remaining campuses that the defunct for-profit chain formerly owned.

The nonprofit Zenith Education Group announced Wednesday that it will halt new student enrollments and teach-out 21 Altierus (formerly Everest) and WyoTech campuses. Zenith said it plans to expand academic offerings at its three remaining campuses, which together enroll 560 students and are located in Houston, Tampa Bay, Fla., and Norcross, Ga.

ECMC Group, the large student loan guarantee agency, created Zenith in 2015, when it spent $24 million for 56 Everest and WyoTech campuses and for online programs. The campuses were on the verge of immediate closure because the struggling Corinthian lacked the cash to withstand sanctions slapped on it by the Obama administration’s Education Department.

Since then Zenith and ECMC have spent more than $500 million to keep the former Corinthian programs running.

Zenith spent the money to help ensure continuity for students as they sought to finish their educations and to create a softer landing for the former Corinthian faculty and staff members, said Jeremy Wheaton, Zenith’s president and CEO since August.

“There’s been a great deal of good done here and a great deal of investment,” he said in an interview. “We absolutely would do this again.”

When Zenith took on the campuses, they collectively enrolled about 33,000 students. Wednesday, the 21 campuses slated for closure enroll 5,400 students. At its peak roughly five years ago, Corinthian institutions enrolled more than 82,000 students, mostly in health care, business, IT and other career programs. The publicly traded company was valued at $3.4 billion, making it one of the largest for-profit chains in the nation.

Before its collapse, Corinthian had been facing a wide range of state and federal investigations, mostly for deceptive advertising and fraud. California last year won a $1.1 billion court judgment against the former company for false and misleading job placement claims, unlawful debt collection, and misrepresenting the transferability of credits to students.

Some advocates complained about the deal the Obama administration brokered with ECMC, arguing that the feds should have instead offered Corinthian’s students a tuition refund or loan disbursement.

But Ted Mitchell, then the under secretary of education and currently president of the American Council on Education, at the time defended the arrangement. He said it averted disastrous consequences, including disruption and displacement for thousands of students.

“Pulling the rug out from under them under any circumstances would be problematic,” Mitchell said of the affected students. “This is a very vulnerable population of learners.”

Full refunds for all students also would have cost taxpayers up to $600 million, the department said.

ECMC instead shouldered the financial burden. Zenith said that it saved federal coffers an estimated $435 million in closed-school discharge payments. ECMC also forgave $480 million in private student debt.

After buying the campuses, ECMC and Zenith immediately began a series of reforms designed to improve academic quality at the former Corinthian institutions and to ensure that the credentials they issued had more value in the job market. Zenith also immediately cut tuition rates by 20 percent. Those changes were funded in part by $21 million from the ECMC Foundation.

The nonprofit overhauled curricula, financial aid policies and marketing strategies. It instituted a more student-friendly admissions process while creating new scholarships and expanding financial counseling and career services for students.

Zenith phased out academic programs with low graduation and job placement rates. And it gave students in some underperforming programs a choice of continuing their education or receiving a full refund of their tuition payments.

However, Zenith decided the business model was not sustainable at most of what was left of Corinthian.

“Over the past few years, it has become evident to us that many of our campuses are located in areas that are geographically inconvenient for underserved students or not built to accommodate the programs that we want and need to offer,” the nonprofit said in a written statement.

Some of the academic programs continued to struggle with an “overhang” of inadequate outcomes from the Corinthian era, Wheaton said. And the market shifted on certain programs, he said, particularly for WyoTech, which focuses on automotive and diesel technology and repair.

Zenith is applying lessons it has learned to the three remaining campuses in Florida, Georgia and Texas.

Wheaton said the career college chain would continue to develop partnerships with local employers and is considering new experiments, such as adding apprenticeship opportunities. He was optimistic about the future of the three remaining campuses, which Zenith hopes to expand. And Wheaton said Zenith would continue to focus on helping underserved student groups.

“It’s a huge need,” he said.

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