Corinthian Colleges May Be Shutting Their Doors, but Students Still Bear the Costs
Corinthian Colleges, Inc. is a company in for-profit higher education that has built and sustained an empire that relies on low income students and federal funding. Corinthian’s 120 campuses, 72,000 students and 12,000 employees is about to see massive change as the company, notorious for its unethical and dishonest practices resulting in investigations and lawsuits, is facing bankruptcy. Though the federal government has made clear its intent to protect students’ interests, it is still unclear whether students of this for-profit college system, many who have massive student loans and debt, will still be on the financial hook even once Corinthian’s campuses have shut their doors.
On Friday, June 20th, the Department of Education released a statement putting Corinthian Colleges, Inc. on an “increased level of financial oversight” because Corinthian failed several times to hand over documents about its practices of using falsified job placement data to recruit prospective students and altering grades and graduation rates. Corinthian Colleges have received $1.4 billion annually from the federal government, mostly in the form of federal student loans and Pell grants.
The source of the money for for-profit colleges is complicated. Companies like Corinthian get a significant amount of funding from Wall Street, but are also eligible to receive up to 90% of their funding from federal funds. This 90% does not even include federal funds from veteran programs like the post9/11 GI Bill. Corinthian and other for-profit colleges and universities stand to profit from bringing in students who receive need based aid, which is reflected in their recruiting and advising practices. Poorer students and servicemembers are aggressively recruited, and told that the upfront cost of their education is minimal, but with little instructional support, academic or financial advising, students are left with huge debt and few marketable skills…many students in debt without even a degree to show for it.
According to a report by the Education Trust, enrollment in for-profit colleges has grown by 293% from 1998 to 2012; low income students of color have accounted for a large portion of this increase. Along with growing enrollment, student loan debt originating in for-profit institutions has also steadily risen. Students enrolled in for-profit colleges only make up 10% of all students enrolled in a higher education of 2 or more years. However, 46% of all defaults on federal student loans came out of for-profit institutions.
The Corinthian chain of colleges has become known as one of the worst offenders among the for-profit colleges. Enrollment has seriously declined since its investigations by the Securities and Energy Commission, the Consumer Financial Protection Bureau and several state attorneys general. Understandably, the company’s stock has also fallen from $20 a share in 2010 to just under 30 cents a share last Thursday.
On June 23, the Department of Education and Corinthian Colleges came out with an agreement: Corinthian Colleges said they need $16 million from the federal government to get through the week, in order to create a plan to close and phase out schools. The “teachout” plan involves allowing current students to finish up their degrees while not accepting new enrollments. This bailout of a particularly bad actor does not stand to benefit current students or those who have already become saddled with excessive debt from the chain of schools.
What does all of this mean for Corinthian students? Typically, the Department of Education discharges federal student loan debt if a for-profit college goes bankrupt, but only if students can prove economic “hardship.” Should any students really have to pay for their education from a company that has been investigated and proved, time and time again, to be dishonest, incompetent and in many cases, detrimental to students’ trajectories in life?
By: Annie Wood
Higher Ed Not Debt
Posted on 30 June 2014