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For-Profit Corinthian Colleges to Close All Remaining Schools

April 27, 2015
Student Loans
For-Profit Corinthian Colleges to Close All Remaining Schools
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Corinthian Colleges, a for-profit higher-education chain that was targeted by federal regulators because of its high-cost student loan program and its lofty claims about student success, is closing all of its remaining schools.

The shutdown, announced Monday and effective immediately, will affect about 16,000 students and 28 “ground campuses” owned by Corinthian. It comes after the U.S. Department of Education levied a $30 million fine on the chain for “serious” misrepresentations about job placement rates for its students.

Corinthian once had more than 100 campuses in the United States and Canada under the names Everest, Heald and WyoTech. It also offered degrees online.

In February, current and former Corinthian students received $480 million in debt relief after another company, Education Credit Management Corp., bought out most of Corinthian’s schools in a deal brokered by the federal government. It had already sold 56 campuses to Zenith Education Group in November 2014.

The federal Consumer Finance Protection Bureau sued Corinthian Colleges last year, accusing it of luring tens of thousands of students into taking out loans with false promises of job prospects and career services. The bureau alleged that the schools also used illegal collection tactics to pressure students to pay off loans — even while they were still in school.

“For too many students, Corinthian turned the American dream of higher education into stories of financial despair,” Rohit Chopra, student-loan ombudsman for the CFPB, said Monday in a  statement. “We continue to urge borrowers to submit complaints with federal agencies to aid regulators. The CFPB will also continue to look closely at the for-profit college sector and take appropriate steps to hold accountable those who harm consumers.”

Interest rates on Corinthian’s so-called Genesis loans were more than twice those of more competitive student loans, and more than 60% of students defaulted on the loans before they completed their studies, according to the CFPB.

”We believe that we have attempted to do everything within our power to provide a quality education and an opportunity for a better future for our students,“  Corinthian CEO Jack Massimino said in a written statement Monday. ”Unfortunately the current regulatory environment would not allow us to complete a transaction with several interested parties that would have allowed for a seamless transition for our students. I would like to thank our employees for their selfless dedication and commitment to fulfilling the educational and career goals of all of our students.”

In his statement, Massimino claimed Corinthian, which had been operating under an agreement with the federal government since last year, had been in “advanced negotiations” to sell several of its remaining campuses. He blamed federal and state regulators for those deals falling through, saying potential buyers were scared off by what he called “financial penalties and conditions” that would have been imposed upon them.

”Overall, our schools did a good job for the students they served,” Massimino said. “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.”

Under Education Credit Management’s deal with the government, former Corinthian students with loan debt immediately got a 40% reduction in how much they owed. The group also agreed to stop aggressive tactics used by Corinthian to collect on student debt, including the threat of lawsuits, and to work to clear the credit reports of students who have been harmed by predatory loans from Corinthian. It was barred from running its own student-loan program for seven years.

U.S. Undersecretary of Education Ted Mitchell said in a statement that Corinthian had “failed to respond to the Department’s repeated requests for answers about questionable practices,” including what appeared to be “false and misleading” student job placement statistics. The $30 million fine was announced April 14.

“Students seeking better life options should be assured that their investments will pay off in increased knowledge, skills, and opportunity,” Mitchell said “What these students have experienced is unacceptable and we look forward to working with Congress in an effort to improve accountability and transparency in the career college industry.”

He said the Department of Education will be contacting Corinthian students to help them continue their educations and urged them to seek further loan relief with state agencies.

Campuses closed Monday include Corinthian’s 13 remaining Everest and WyoTech campuses in California, Everest College Phoenix and Everest Online Tempe in Arizona, the Everest Institute in New York, and 150-year-old Heald College — including its 10 locations in California, one in Hawaii and one in Oregon.

Doug Gross is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @doug_gross and on Google+.

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