What Happens When Your College Is for Sale?
Corinthian Colleges Inc.’s slogan emblazoned on its website is “We Put Students First.” However that is not quite the reality their students have come to know.
For-profit, or proprietary, colleges have become the fastest-growing sector in higher education, but they have recently come under scrutiny for their high cost, high borrowing and default rates and low employment rates post-graduation. Commonly known as “career colleges,” many for-profits spend heaps on advertisements, marketing, and recruitment claiming to provide a ladder out of poverty, having a diploma from a for-profit actually makes it more difficult for graduates to get hired.
The better part of the last year has been rough for Corinthian Colleges, Inc., the California-based for-profit college giant. Corinthian, the publicly-traded parent company of Everest, WyoTech, and Heald colleges and universities all throughout the country, was already under the careful scrutiny of the federal and state governments when its financial troubles unfolded in the summer months. As one of the largest for-profit college companies, all eyes have been on the company, as well as the Department of Labor, to see what this would mean for the company’s students.
The company faces a slew of outstanding investigations and lawsuits filed by states’ attorneys general and an investigation by the Department of Justice for lying about attendance records and using illegal recruiting and financial aid tactics to sustain their access to federal student aid. Most recently, Corinthian has been sued for$500 million by the Consumer Financial Protection Bureau for its predatory lending scheme and exaggerating job placement rates by defining “career” as something that could last only one day, then paying employers to temporarily hire the company’s graduates.
David Halperin, a Washington, D.C.-based lawyer critical of for-profit higher education has not been too surprised about Corinthian’s shady, recently uncovered tactics. “The Education Department hasn’t been that vigilant about for-profits, which is why we’re in this mess.”
All things considered, Corinthian has caught plenty of breaks, particularly from the Department of Education. After the company failed to hand over requested documents to the Department of Labor in June, it was put on a 21-day time-out from receiving federal funds in the form of federal loans and grants. The for-profit company told the Department of Education they wouldn’t be able to survive and operate and would slip into bankruptcy. A deal was then worked out that would allow Corinthian to continue to operate as usual while a plan was sorted out for its 107 campuses and 72,000 students.
Currently, for-profit colleges operate under a 90/10 rule, where 90 percent of their revenue can be derived from federal funds. Which is interesting since shares of these companies are traded on Wall Street, with the purpose of making a profit for shareholders. This federal funding can be in the form of federal loans or grants like the Pell Grant. A loophole that has recently been uncovered is heavily recruiting members of the military, since GI Bill funds are not included under funds that count toward the 90 percent of funding from federal sources. Corinthian Colleges is not the only company that has taken advantage of those who served their country to make a few extra bucks.
Federal funds, as it turns out, are essential to the survival of for-profit colleges. In fact, the Center for Investigative Reporting found that in 2012, 133 for-profit colleges were gleaning more than 90 percent of their revenue from taxpayer dollars. The exact dollar amount taxpayers kicked in to these businesses in 2012 was a whopping $9.5 billion.
Corinthian planned to sell most of its campuses, offering “teach-outs” for current students, and close two campuses. Through the summer, Corinthian still enrolled students, even once the news broke about the schools’ eventual sales. There still has not been too much clarity about what the sales mean for Corinthian’s 12,000 employees.
In the last week, Corinthian announced that it plans to sell 56 of its campuses to the ECMC group, a nonprofit organization that runs one of the biggest student loan guaranty agencies. The sale will reportedly nab 39,000 current Corinthian students, though the organization has no experience with running schools. The going price for the tanked company? Corinthian executives and shareholders will benefit from the $24 million check from ECMC for the sale, while students remain saddled with debt.
Corinthian has announced that some campuses that are being sold or closed will be offering a “teach-out” option to students, where they can finish their certificate or degree. Although a degree or certificate from a Corinthian school may not mean much to employers and definitely means heaps of debt for students, the company’s schools are heavily pushing this route. Students who accept the “teach-out” are agreeing to continue and finish up their education, which also means they are still on the hook to repay their student loans. Students who enrolled after June 22, 2014 likely will not have the option to opt for a refund.
While the company has been focused on which schools will be easier to sell (WyoTech) and which programs are a tougher sell (nobody in the market is into buying business programs), two campuses are in the process of shutting their doors for good. One of the campuses is in Eagan, MN, a suburb just south of St. Paul.
It’s an understatement to say that Corinthian Colleges are less than willing to be upfront with their students, officials and the public, so as frustrating as it is, it should come as no surprise that the closing process has been shrouded in mystery. There is a swath of students who are eligible to have their loans forgiven for their time at the closing institution, but only if the school informs them of the possibility and the process.
Amid the plethora of news stories about how Corinthian is terrible press and impending doom of the for-profit education company and concerns raised about outcomes for students, there has been little news of what’s happening on the ground for students whose school is closing in the next year.
Current students are scrambling to find out what’s next, and how much—if any—of their loans will still be owed. Those who recently graduated or did not finish their degrees are left with many questions as well.
Even if a lawsuit is filed by the Department of Education, it remains to be seen how even the best outcome would benefit current and past students, given that the company is broke.
Pauline Abernathy, vice president of the think tank The Institute for College Access and Success (TICAS), asked, “The issue is, if [the government] were to win a lawsuit [against Corinthian], where would the money come from to compensate the students?”
After talking to Everest students in Minnesota, a few main themes that emerged across their stories. All students Generation Progress spoke with talked about being heavily recruited and hastily enrolled, pushed into federal loans, as well as Corinthian’s own private “Genesis” loans, and a frustrating inability to secure a job.
Corinthian’s crafty marketing pulls students in with programs that sound appealing, offering the promise of bettering their economic situation, and the chance to hone skills in their area of interest. “I saw a commercial for Everest on TV, and I was sick of being laid off, and I had always wanted to be in the medical school,” said Jayne, a 2008 graduate of Everest’s Eagan campus.
Jayne headed over to the Eagan campus, in a dreary corner of a suburban strip mall, where she was given a “hard-pressure sell” by an admissions representative.
“The day I went in to check out the school, they filled out all the [enrollment] paperwork. They had it basically filled out before I even walked in,” Jayne said.
The figures she was given turned out to not be accurate, as she still owes more than she’d expected in student loans. Though Jayne went on to be an A honor roll student, maintain a spot on the Dean’s list and serve as a student ambassador, she says she did not gain the education, outcome or opportunities she was promised.
“I don’t believe I should pay a penny for that shoddy education,” Jayne said.
“Looking back on the financial aid process, it felt like buying a car from a crooked salesman;everything was kind of cryptic. As far as help with employment, it was practically non-existent,” said Janese, a former student of Everest’s Eagan campus.
Past and current students of Everest Eagan talked a lot about the issue of jobs. Many graduates of Everest programs have had employers scoff at their educational background, and others said that the jobs they could get were not above minimum wage, others discussed the lack of support from the school’s career services—some of the jobs they suggested were super far away or paid very little on commission.
“I was one of the lucky few that actually secured my own job with a decent hospital,”Janese said. “Most of my classmates ended up changing fields or working for less than 10 [dollars an hour] in retail.”
Another former student, Marc, said that he was initially in Everest’s pharmacy technician program, but was told his criminal record would keep him getting hired in the field. However, the college pushed him into a track they probably could have guessed would be equally hard for someone with a record to get hired.
“Looking back I feel like they convinced me to stay and enroll in the medical assistance program just to keep me at the school. Because of my record I wasn’t convinced that I would find a job in that field but they assured me that it wouldn’t be a problem,” Marc said. “They were not helpful in finding me a job. After not being able to find a job, I went to a temp service and found a job on my own not even related to the field I went to school for.”
Ambyrr, an Everest Institute Eagan graduate of 2013, said that she and other students in her program were promised not only licensure, but assistance in securing a job.
“They told me lifetime placement for jobs, and if I [did] the Medical Insurance Billing and Coding (MIBC), they will pay for my coding certificate 6 months after I graduate,” Ambyrr said. And as for the supposed lifetime guarantee: “They will send emails once a month with jobs 30-50 miles away. A year and a half later I’m still jobless with expensive student loans.”
Jayne also reported a sham of a career services department during her time in the medical assistant program.
“They sent me on one interview. I had a horrible externship to a podiatrist, just taking shoes off Alzheimer’s patients,” she said
She also reported a despicable lack of resources, like 20 computers for a class of 30 students, and said basic skills needed in the field were lacking.
“Never once were we taught how to do a chart,” she said.
Everest Institute Eagan students like these are still waiting, and their voices are lost in the narrative of the downfall of a huge Wall Street-traded company. This is sadly, fitting, as they have been marginalized and taken advantage of in their pursuit of higher education and bettering themselves academically and economically.
It’s clear from their stories and experiences that they were tricked, swindled, defrauded, duped and trapped into tens of thousands of dollars into debt and scarce job prospects. They are simply doing what they can to get their ticket to the middle class, but are left worse off.
The announcement of the sale of Corinthian Colleges’ campuses to the ECMC group has left a lot up in the air for current students. Up to $3 million of loans held by Corinthian students may be forgiven, but it’s uncertain as to which or who might benefit. It’s speculated that past graduates may be out of luck with regard to getting a refund.
At the end of October, the Obama administration launched a new set of “gainful employment” rules that aim to hold schools—mostly for-profit career schools—accountable for their graduates’ debt relative to their income. Gainful employment is a pretty basic ideal for college graduates; it’s common-sense that grads should be able get a better job and better pay than before attending college. The rules aim to ensure students and taxpayers’ investments are worthwhile.
While many critics of for-profits say the new rules don’t do enough, the regulations are a step in the right direction. Meanwhile, for-profit college companies are unhappy with the new regulations, and have already begun to launch challenges to the Department of Education’s new rules through the court. A lawsuit was launched almost immediately by the Association of Private Sector Colleges and Universities (APSCU), and a trade association representing for-profit colleges in New York also launched a federal lawsuit. The private-sector education groups object to their share of federal funds being determined by how well their students do, which clearly shows their priority is not the success and well-being of their students.
As students, past and present, of Eagan’s Everest Institute wait on details, students are in a tough spot with outstanding loans and educational credits that don’t transfer to other institutions.
“I pay [loan payments] because I don’t want them to report negatively to the credit bureaus. Also no schools would take their credits so upon going back to school to become a nurse, I had to take a lot of classes over,” former Everest student Janese said.
For now, there is still a lack of clarity as to what this all means for Corinthian students, particularly those who attend or attended campuses that are soon closing. What happens will set a precedent. All eyes will be on the Department of Education to see if they put students first, or if they protect a business that has preyed on students’ financial well-being.
Annie Wood is a Student Debt Reporter at Generation Progress. Follow her on Twitter @anniewood28.
Posted on 3 December 2014
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