Corinthian Colleges, Inc., known for operating the Everest University, WyoTech, and Heald College chains, is selling most of its US campuses and closing down others, after the for-profit education company and the US Department of Education reached a deal.
Corinthian announced last week that it will sell 85 of its US schools and closing 12 others, making it the first major casualty of the federal government's crackdown on for-profit colleges for predatory loan practices, misleading job placement data, and poor student training . The company will work toward signing definitive agreements for US campus sales in about six months and will begin selling its Canadian campuses as well, according to a press announcement.
Over the last year, DOE, the US Consumer Financial Protection Bureau, and attorneys general across the US have been investigating whether Corinthian falsified job placement rates and student attendance records, according to the Los Angeles Times. Then in June, DOE put a 21-day delay on Corinthian’s access student loan and grant money. Corinthian, which receives almost 85 percent of its revenue from federal student aid, told investors that the company may have to shut down.
Last month, Corinthian and DOE reached a tentative agreement to wind down the company’s operations by phasing out programs and selling campuses. It was finalized July 3.
The deal goes into effect on July 8. It will release $35 million of federal student aid that Corinthian can use only for approved educational purposes, such as student refunds and payroll expenses, according to a July 7 SEC filing. Corinthian can drawdown Title IV student aid funds on a weekly basis. There will also be an independent monitor who has full access to Corinthian’s personnel and budgets and oversee the sales of the campuses placed. Corinthian will have to turn over all enrollment and job placement data by July 15.
The US government has been cracking down on for-profit colleges since the start of 2014, especially as student debt continues to rise. In February, the Consumer Financial Protection Bureau sued ITT Educational Services, Inc. for predatory student lending and providing misleading information about job prospects. In March, the Obama administration proposed regulations that would penalize programs that didn’t train its graduates to find a job to pay off their student debt. DOE found that some programs, particularly for-profits, don't adequately prepare students at the expense of both students and taxpayers.
"Students at for-profit colleges represent only about 13 percent of the total higher education population, but about 31 percent of all student loans and nearly half of all loan defaults," according to a DOE fact sheet. "In the most recent data, about 22 percent of student borrowers at for-profit colleges defaulted on their loans within three years, compared to 13 percent of borrowers at public colleges."
Corinthian Colleges saw its new student enrollment drop 13.1 percent compared with last year in its third quarter filings, released in May. The company's net revenue was also down 11.7 percent to $349.8 million.