Problems sprouted for the Santa Ana, Calif.-based Corinthian Colleges when it declined to provide enrollment and job placement data required by federal law after five months of requests from the Education Department.
The department’s Federal Student Aid office put a 21-day hold on federal aid to Corinthian in late June, after it failed to address concerns about its practices including job placement for graduates and allegations of altered grades and attendance.
The hold on funds left the company in a shortfall. Corinthian reached out to its lenders for alternate funding but was denied, according to a filing with the Securities and Exchange Commission.
Corinthian collectively enrolls 72,000 students nationwide who receive $1.4 billion in federal financial aid each year. “Taught-out” means that students currently enrolled can continue until they graduate, but no more will be enrolled.
Tiana Mills, 27, of Fort Worth earned an associate degree in medical insurance billing in 2010 from the Everest North campus in Fort Worth.
Mills was at the campus, 5237 N. Riverside Drive, looking for help with her résumé Tuesday afternoon. She still hasn’t found a job in the field and was told none of her classes would transfer to Tarrant County College.
“I’ve never even worked in the medical field,” the Fort Worth resident said. “I’ve been coming up here since I graduated to get help finding jobs. Everyone I know from here hasn’t found jobs either. They work in restaurants and retail.”
“Fort Worth North operations are gradually being wound down, and those students have been informed that the school will be ‘taught-out.’ New enrollment has been stopped,” Corinthian spokesman Kent Jenkins said.
The shift in ownership is a part of a deal struck with the Education Department last week to give students a chance to complete their education.
An independent monitor appointed by the Education Department will oversee the process for all Corinthian campuses.
“We have accepted an operating plan for Corinthian Colleges Inc. that will protect students’ futures and fulfill the Department’s responsibilities to taxpayers moving forward,” Education Undersecretary Ted Mitchell said in a news release.
Some campuses to be sold
Other Everest campuses such as the ones in south Fort Worth, Arlington and Dallas will be sold to a company that will “continue serving those students,” Jenkins said.
Corinthian plans to complete the sales within six months, he said.
Corinthian will work with the Education Department to establish a reserve fund of at least $30 million to pay refunds to eligible students who enrolled as of June 23 at the Everest campus in north Fort Worth and the 11 others that are closing.
Those schools are in Pennsylvania, Massachusetts, West Virginia, Minnesota, Michigan, Indiana, Utah, Missouri, Maryland and Virginia.
“Any student that is enrolled at a school that is being taught-out since June 23 is eligible for a refund,” Jenkins said.
He said Corinthian is working with the department on a specific notification for students. He said that the department must approve it and that the company has already made “multiple communications” to students about where they are in the sales process.
Corinthian must inform students of their options, and each campus must create an operating plan that will end enrollment, according to the department.
Enrollment and job placement data for 175,000 graduates that was sought by the department — and never provided — is due Tuesday.
The department is releasing $35 million in student aid to be used for daily operations such as student refunds, payroll and accounts payable. The company cannot use any of the federal funding for legal settlements or debt repayment.
The future of the for-profit education company is uncertain. It has been sued by attorneys general in California and Massachusetts, according to The Wall Street Journal's Market Watch.
For-profit college concerns
A continuing concern about for-profit colleges is that students struggle to find work and end up carrying a high student loan burden.
Students at for-profit colleges represent about 13 percent of the total higher education population but about 31 percent of all student loans and nearly half of all loan defaults, the Education Department says.
Barmack Nassirian, director of policy analysis at the American Association of State Colleges and Universities in Washington, D.C., said problems in the for-profit college sector have continued for several years. This case is an example of how a for-profit college company offers “toxic programs that saddle people with student loan debt,” he said.
“That’s the dynamic here,” Nassirian said. “They had a really nice run. They made a fortune until very recently.”
Earlier this year, the Obama administration announced a series of proposed rules aimed at holding more for-profit schools accountable.
In 2011, Westwood Colleges in Texas were fined $41,000 by the Texas Workforce Commission for high-pressure recruitment tactics and administrative issues such as failing to file changes of ownership and failing to notify the commission about pending lawsuits.
Mills said she will start from scratch by earning an associate degree in occupational therapy from Tarrant Community College Northeast Campus.
“This school is a joke,” she said.