The for-profit education leviathan, Corinthian Colleges Inc., is no more. On April 27, 2015, that company announced that it has terminated all operations and discontinued instruction at its remaining 28 ground campuses. Locations that have been closed span from Corinthian’s 13 remaining Everest and WyoTech campuses in California to the Everest College Phoenix and Everest Online Tempe in Arizona, as well as the Everest Institute in New York and the 150-year-old Heald College, which houses 10 locations in California, one in Hawaii and one in Oregon.
In a press statement, Jack Massimino, Chief Executive Officer of Corinthian, admitted to the public, “Overall, our schools did a good job for the students they served. We made every effort to address regulators’ concerns in good faith. Neither our Board of Directors, our management, our faculty, nor our students believe these schools deserved to be forced to close.” Despite Mr. Massimino’s contentions, a closer look into the world of Corinthian Colleges Inc. illuminates a lengthy list of abuses by the company that have ultimately led to its self-inflicted demise.
Abuses that have come under scrutiny in a report by the Consumer Financial Protection Bureau (CFPB) span from inadequate career counseling through Craigslist, to artificially inflating job placement rates by means of “paying employers to temporarily hire graduates,” as well as “creating fictitious employers and reporting students as being placed at those fake employers.”
Further reports filed through the Senate Committee on Health, Education, Labor, and Pensions illustrate further the severity of Corinthian’s damaging impact on the higher education market. From an enrollment of 28,372 in 2001, enrollment at Corinthian Colleges Inc. swelled to 113,818 by 2010. Over the span of four years, revenue nearly doubled from $909 million in 2006 to $1.76 billion in 2010. Of this total revenue, 83.1 percent was comprised of federal education funds stemming from Title IV Federal financial aid programs, as well as ECASLA and Post-9/11 GI Bill benefits from the Departments of Defense and Veterans Affairs. After funneling 32 percent of this revenue directly into profit and marketing, Mr. Massimino’s $3.3 million compensation package included, Corinthian Colleges Inc. emphasized a large portion of its remaining revenue on recruiting, employing almost 3,000 recruiters relative to less than 1,500 career services and students services personnel combined. This ultimately translated into poor student outcomes, holding a 66 percent withdrawal rate within a four-month time frame of enrollment and as high as a 36.1 percent default rate in 2008.
Additionally, Corinthian Colleges Inc. remains under fire for its predatory Genesis Lending Program, which serviced institutional loans that carried interest rates of 15 percent with an origination fee of 6 percent. Comparatively, the interest rate for a Federal Stafford Loan is 4.6 percent. Acting upon these reports, the CFPB and other monitoring agencies have filed a litany of lawsuits against Corinthian Colleges Inc., the most significant being a lawsuit filed by the CFPB in September 2014 to recoup over $500 million in damages from the Genesis Lending Program. Eventually, the weight of the financial burden of these lawsuits became so great that it forced the company to go belly up by April 2015.
As lawsuits against Corinthian Colleges Inc. continue to accumulate, a recent grassroots movement by former students has added yet another dynamic to the aftermath. Dubbed the “Corinthian,” a 15-member group of for-profit college students refusing to pay back their loans to the federal government has recently ballooned to almost 200. This group that occupies Wall Street on a daily basis continues to grow as a larger movement, led by student loan watchdogs like Sen. Elizabeth Warren, D-Mass., and Sen. Dick Durbin, D-Ill., defend measures of loan forgiveness and try to hold higher education institutions more accountable.
As the summer months unfold, it will be interesting to see how the course of the developing student debt debate evolves. Although other large for-profit education companies continue to defraud students and taxpayers alike, efforts to reign in predatory practices are underway. Perhaps the voice of the “Corinthian” will not prevail.
Update: The federal government has announced that it will forgive the student loan debt of former Corinthian students.
Cover Photo Source: Ana Venegas / Orange County Register / Zumapress / http://bit.ly/1eWpbPI.