The U.S. Department of Education has shown the embattled for-profit college behemoth Corinthian Colleges the door. In a deal the two bodies reached last Thursday, Corinthian Colleges, which operates 102 campuses around the country, has agreed to sell 85 campuses and gradually wind down operations at another 12. It’s a striking blow—but hardly the death knell—for a scandal-plagued industry facing intense scrutiny over the way it preys on the ambitions of poor students, veterans and people of color trying to get ahead in a constrained economic market. And while the move may be a long-term win in the Obama administration’s multiyear effort to rein in the business practices of the largely unregulated industry, the immediate welfare of Corinthian’s 72,000 students is still uncertain.
Corinthian Colleges, and many other for-profit colleges and universities have been criticized for years for fleecing students of their federal student aid money while providing an education that other academic institutions and employers don’t recognize as valid, and then saddling them with debt that they’re unable to repay. The current standoff began in January when Corinthian, which owns the for-profit college brands Everest College, Everest Institute, WyoTech and Heald, most of which operate in California, failed to produce documents on job placement, student outcomes, and other information the Department of Education requested. By June, unhappy with the company’s progress, the Department of Education froze the disbursement of federal funds to the company, which comprised up to 93 percent of the company’s 2013 revenue, Bloomberg News reported. In other words, the Department of Education threatened to force Corinthian out of business if it did not come to the table to negotiate its closure.
But it was not so easy to cut ties. The Department of Education would have been forced to discharge the outstanding loans of Corinthian’s 72,000 students to the tune of $1.2 billion in debt for Corinthian alone, Inside Higher Ed reported. Under the terms of the deal Corinthian published Monday, Corinthian must sell four WyoTech campuses, 12 Heald colleges and institutes, and 69 Everest college campuses before the end of the year. Some 67,000 students are currently at the affected campuses enrolled. The Department of Education will hand off $35 million to keep Corinthian afloat in the meantime, which may only be used for refunds or payroll expenses, and not for legal fees or to pay shareholders, Inside Higher Ed reported.
“This agreement allows our students to continue their education and helps minimize the personal and financial issues that affect our 12,000 employees and their families,” Jack Massimino, CEO of Corinthian, said in a written statement last Thursday. “It also provides a blueprint for allowing most of our campuses to continue serving their students and communities under new ownership.”
For critics of the for-profit schools industry, whether or not the impending demise of Corinthian is cause for celebration depends on your priorities, says Kevin Kinser, a professor of education at the University of Albany-SUNY. “The most significant thing that’s been done is the Department of Education made it clear that they have the authority and the power to take this kind of action when the situation warrants it,” Kinser said.
“But,” he added, “the issue is not so much about celebrating the fall of a for-profit institution so much as thinking about the students involved, the ones really harmed by the failure of this institution to be able to provide a viable educational model for its students.”
Corinthian, and the for-profit college industry it was a leader in, had come under fire in recent years over industry practices and the loan default rates of its students. According to the The Institute for College Access and Success, for-profit students accounted for 46 percent of all federal student loan defaults in 2012 even though they were just 13 percent of higher education students. A two-year Senate investigation into the industry found that more than half of students in mid-2010 left their programs without a degree, although 96 percent of for-profit students took on debt to enroll in their programs. Multiple states including California, Connecticut, Kansas and Massachusetts, have filed lawsuits alleging that Corinthian and other for-profit colleges inflated job placement rates or engaged in aggressive marketing that lured students to programs that were not offered, then steered them to other classes.
Federal student aid comprises nearly 90 percent of some for-profit colleges’ revenue. Taxpayers subsidize the industry while students get roped into debt that’s nearly impossible to discharge, and in this job market all too easy to default on. Patrick Denice, a doctoral student at the University of Washington, found that those who graduated with a two-year associate’s degree from a for-profit college earned negligibly more than those with just a high school degree (PDF). And a report from Public Agenda found that while roughly half of employers don’t see much difference between for-profit and not-for-profit programs, half of employers say public universities better prepare students than do for-profit.
“Our institutions play a vital role in educating the new traditional student,” Noah Black, spokesperson from the Association of Private Sector Colleges and Universities, told Colorlines via e-mail. Black’s referring to the so-called “non-traditional students,” those working parents and older, returning students, veterans and women of color who have made up the bulk of the last decade of enormous growth of the for-profit college industry. The for-profit college circuit also enrolls a disproportionately high number of low-income students, students of color, and black students in particular. The industry is particularly attractive to working students because for-profit schools have done what traditional and more competitive not-for-private universities have been slow to do: offer small and flexible nighttime and online classes crucial for those who have to work or take care of family.
Thursday’s agreement puts other similarly vulnerable for-profit schools companies like ITT Technical Institute and Educational Management Corporation on notice. It also highlights the need for regulations that can put in place preventative measures before schools reach this crisis point, says Kinser. “Right now there are very few tools at the Department’s disposal to be able to address these kinds of issues in advance,” Kinser says. And the industry successfully torpedoed proposed federal “gainful employment” rules that would have installed preventative checks on for-profit schools companies and others that send students away with debt they cannot repay—and has continued fighting against reintroduced, and weakened, rules.
“These companies have been able to push back on regulation that would have tried to curb these abuses,” says Osamudia James, a University of Miami professor of law whose research focuses on education. “We’d be overly optimistic to call this a moment of reckoning for the for-profit schools industry.”
And what remains to be seen is how students at these universities will fare. Corinthian students will likely face troubles about whether credits from courses they’ve taken can be transferred to other universities, says Kinser. They’ll likely have difficulty figuring out alternative education opportunities or whether there are other programs that they can be moved into. Critics of for-profit schools have long complained that schools have unique accreditation schemes that make students’ credits non-transferrable, and therefore renders them useless, if a student hopes to complete their degree elsewhere. With Corinthian’s closure, those questions are all the more pressing.
“Any action or decision by the Department needs to ensure that the students we serve, the ones historically underserved by traditional higher education, do not have their access, opportunity and choice negatively impacted,” APSCU’s Black said.
And indeed, as the Corinthian case shows, when it comes to federal efforts to crack down on the for-profit schools industry, the immediate welfare of the for-profit colleges and the students they enroll are intertwined.