Tag Archives: Department of Education

This is what for profit college education looks like

It’s not pretty

In 2007, the California attorney general filed a lawsuit against Corinthian Colleges, Everest’s parent company. California’s complaint against Everest and Corinthian included a litany of allegations: falsified job placement statistics, aggressive and unethical sales practices, and a pattern of jobless graduates carrying mountains of debt.

But that case never went to trial: The lawsuit was immediately settled with no admission of wrongdoing on Corinthian’s part. The company paid a $500,000 civil penalty and $4.3 million in restitution to students at campuses that had notched the worst violations. As of this year, according to a source familiar with the matter who spoke on background, $3.4 million of that money has been paid out to 6,000 eligible students, for a total of approximately $560 each.

Six years later, a new California attorney general, Kamala D. Harris, filed a new lawsuit against Corinthian that was, for the most part, indistinguishable from the first complaint, detailing the same violations, alleging that the company had materially broken every agreement made in the previous settlement. The recent federal lawsuit, and those in Massachusetts and Wisconsin, trace similar lines.

The Department of Education began its own investigation into Corinthian in January, requesting details on everything from the company’s job placement rates to financial aid practices. In June, it claimed Corinthian was taking too long to respond completely, and temporarily cut off the school’s access to the federal financial aid money that made up almost 90% of its revenue. Corinthian was so short on cash that even the 21-day delay sent them into a financial tailspin, threatening bankruptcy; the DOE eventually agreed to release the funds, but only on the condition that Corinthian would sell off or close all of its campuses within six months. The final list included only 12 schools that would be shut down; Corinthian plans to sell the other 85, likely to a private equity firm or a for-profit competitor.

But the lawsuits, investigations, and even the Department of Education’s forced shutdown are unlikely to result in any real change for the vast majority of Everest’s current and former students. One of the deep ironies of Corinthian’s collapse is that there are, experts say, effectively too many victims for there to be any reasonable way to compensate them, or to actually shut down the dozens of Everest campuses. It would cost the government billions to forgive the outstanding debt of former students, and any attempt to shut down Corinthian’s schools would displace 70,000 current ones.

The lawsuit by the Consumer Financial Protection Bureau seeks debt relief for students — but only on a tiny fraction of loans, those made directly by Corinthian, not the federal loans that make up the vast majority of students’ debt. Lawsuits in California, Wisconsin, and Massachusetts may provide some restitution to former students in those states, but like the 2007 settlement, would do little more than chip away at students’ loan tallies.

Corinthian College’s impending demise will likely work against former students, said Pauline Abernathy, the vice president of policy organization The Institute for College Access and Success. “The issue is, if [the government] were to win a lawsuit, where would the money come from to compensate students?” Abernathy said.

It’s all but impossible that any real money will come from Corinthian. Corinthian is so cash-strapped that it has been selling off assets — even equipment belonging to its chain of automotive schools — just to stay afloat until it finds a buyer for its campuses. It is extremely unlikely, experts agree, that any state would be able to recover a substantial settlement from the company.

“The chances are slim” that former students will ever see any kind of meaningful debt relief, said Maura Dundon, senior policy counsel at the advocacy group Center for Responsible Lending.