Once-mighty Corinthian Colleges chain is at the end of its run
Accused of misleading students and falsifying records, one of Florida’s — and the nation’s — largest private, for-profit college chains is being forced to sell campuses or close its doors.
06/30/2014 12:24 PM
06/30/2014 7:24 PM
When Marcela Cash visited the Pompano Beach campus of Everest University recently, the for-profit school wooed the Fort Lauderdale woman with promises of a good new job as a medical assistant. School reps touted their job placement department, and the program’s internship opportunities.
Cash signed up. She didn’t know that the school has been accused of inflating its job placement rates, and is in a state of financial crisis. A day earlier, Everest’s parent company, Corinthian Colleges, had announced that the whole corporation — 100-plus campuses in 26 states and Canada — might implode.
“They did not mention it,” Cash said. Informed of the widespread reports about Corinthians’ wobbly state of affairs, she immediately withdrew, and said she never would have signed up in the first place had she known.
“I would have said, ‘Thank you so much, but this really doesn’t interest me,’ ” she said.
Corinthian, which operates 10 Florida campuses and bases its online operations out of Tampa, is nearing the end. It’s currently under investigation by Florida Attorney General Pam Bondi. Attorneys general in California and Massachusetts have filed lawsuits. U.S. Department of Education documents, meanwhile, say Corinthian “has admitted to falsifying placement rates and/or grade and attendance records at various institutions.”
The company, once a star player in the for-profit college sphere, denies the allegations. It also denies that it admitted to what the U.S. Department of Education says it admitted to.
But the suspicion surrounding job placement rates led federal education officials to request certain documentation earlier this year. Five months passed and Corinthian still hadn’t supplied the required proof, and so the government recently placed the for-profit chain on a “heightened” cash monitoring status. That creates delays when the government makes its financial aid payments, and those payments are the company’s lifeblood.
Corinthian receives $1.4 billion in Pell grants and federal student loans each year, which represents 85 percent of total revenues.
Faced with a slowdown in those dollars, Corinthian announced it might close, and the federal government then swooped in last week with a $16 million life preserver — in the form of accelerated financial aid payments. The move was unprecedented, and some have likened it to a bank-style bailout.
Department of Education officials said they were acting to “prevent suddenly disrupting the education of 72,000 students and the jobs of 12,000 employees.”
“Students and their interests have been at the heart of every decision the Department has made regarding Corinthian,” U.S. Under Secretary of Education Ted Mitchell said in a statement. The cash infusion requires Corinthian to come up with a six-month plan for either selling its campuses to new owners or winding down its operations.
Among for-profit schools, Corinthian is hardly alone in being heavily dependent on federal student aid for its survival. To preserve that relationship, the industry spends heavily on political influence, cultivating lawmakers on both sides of the aisle. In the past two and a half years, Corinthian has spent more than $2 million lobbying Washington, according to the watchdog website opensecrets.org.
For-profits colleges, like banks, have been criticized at times for predatory business practices. In the realm of banking, it was deceptively packaged subprime mortgages that swindled homebuyers; with for-profit colleges, it’s students who complain they are misled by overly aggressive recruiters, and left with a mountain of debt but few job prospects.
In the past decade, for-profit colleges have grown tremendously, and that’s particularly true in Florida, where nearly one in five college students now attend a for-profit school. Florida’s Legislature has strongly encouraged the for-profits’ growth.
Florida’s community colleges, which are some of the best in the nation, often offer similar programs at a far lower price. For example, Everest’s Pompano Beach location charges about $15,000 in tuition for a medical assisting diploma; at Broward College, the same program costs $1,698 for in-state students.
With Corinthian, the allegation of inflating job placement numbers strikes at the whole purpose of for-profit schools, which specialize in shorter academic programs that end in either a certificate or associates degree. The students who enter a for-profit college campus are often poor, and in many cases single parents. Their motivation is to improve their family’s economic lot by getting a better job.
Internal Corinthian documents, cited in the California attorney general lawsuit, show the company describing its students as “isolated” individuals with “low self-esteem” who have “few people in their lives who care about them.”
The California lawsuit states “the placement rates published by [Corinthian] are at times as high as 100 percent, leading prospective students to believe that if they graduate they will get a job. These placement rates are false and not supported by the data. In some cases there is no evidence that a single student in a program obtained a job during the time frame specified in the disclosures.”
In some instances, the suit says, Corinthian paid temp agencies to give its graduates short-lived jobs — so it could inflate the job placement numbers, and maintain the accreditation required to receive federal aid. The suit cites an internal company e-mail from 2011, sent by Corinthian CEO Jack Massimino, which includes a presentation stating “we have a placement compliance problem now.”
Massimino earns about $3 million a year, according to Forbes.
While the Florida attorney general investigation of Everest is pending, the 100-plus pages of complaints that Florida has received are public record. Among them:• An Orlando woman who, after taking on heavy debt at Everest, had to attend a community college anyway to get a properly accredited degree.
• A Winter Haven woman who is in loan default and having her paychecks garnished. “I was told by admissions that the college was accredited ‘just as Harvard is’ … employers will not accept this degree.”
• A student who was admitted into a health program despite a criminal record — and who now realizes that record makes her unemployable in her field.
• A single father of two who is struggling with his loan debt — 18 years after attending a Corinthian school.
• A disabled Iraq War veteran from Hialeah who complains of unfairly being denied graduation. “I am tired of for-profit schools taking advantage of us.”
• A medical billing and coding graduate who is currently delivering pizzas because doctors “are not hiring Everest graduates.”
• A former program director at Everest’s Brandon campus, who says “the practice of forging or changing and ‘creating’ student documents was prevalent on the campus in which I was employed.”
Asked about the number of Florida complaints, Corinthian spokesman Kent Jenkins said the documents can be “deeply misleading,” as it’s unclear which complaints, if any, have merit.
At the entrance of Everest University’s Pompano Beach campus, a sign declares “changing students lives.” Jenkins says the change is for the better.
“Tens of thousands of our graduates are hired every year by employers because they find them well-prepared for the workplace,” Jenkins said. “Employers only hire our graduates because they’re qualified.”
Jenkins said more than 300 of Corinthian’s “pharmaceutical technologists” have been hired by CVS Pharmacy —a figure the pharmacy chain confirmed. Among auto repair technician graduates, almost 100 have landed jobs at Pep Boys, Jenkins said, and Bridgestone Tire has hired nearly 100 students as well.
Stay, or walk away?
The fresh infusion of financial aid to Corinthian will give students more time to finish their academic programs. Some have questioned whether that is in the students’ best interest.
Under federal law, students attending a school that abruptly closes have two options: finish the program at another school through what is known as a “teach out,” or walk away from the program. Students who walk away are generally able to discharge their student loans.
Had Corinthian collapsed last week, tens of thousands of students might have walked away debt-free. If students are at a Corinthian campus that changes ownership, there is no opportunity to erase their student loan debt.
“It’s better for them to just close it down and give people their refunds,” said Indiana Williams, a former Everest student at the now-shuttered Hialeah campus.
Laurie McConnell agrees. The former Everest librarian resigned in protest from one of its California campuses last month, after she says the school enrolled a 37-year-old developmentally disabled man who suffers from shakes, has difficulty speaking, and reads at an elementary school level. He’s pursuing a criminal justice degree with hopes of becoming a police officer.
McConnell, who regularly tutored the man, says he lacks a driver’s license and would be unable to pass the exams required to become a cop. The student doesn’t fully understand that he’s borrowing large amounts of loans, she said.
“He can’t read the contract, first of all … how can he be obligated having signed it?” McConnell said. Corinthian shouldn’t be allowed to operate for another six months, she said.
But there’s a catch for taxpayers with a sudden closure. Forgiving loans for tens of thousands of students could wind up costing taxpayers hundreds of millions of dollars, or more.
In coming to the aid of Corinthian, the federal government is trying to prevent a mandatory loan forgiveness that could cost taxpayers a “staggering” amount of money, said Robyn Smith, an attorney who works with the National Consumer Law Center.
“It could be in the billions,” she said.
In the past couple of years, as its enrollment was slipping, Corinthian consolidated its five South Florida campuses down to one, located at 225 N. Federal Highway in Pompano Beach. In addition to Hialeah, campuses in Kendall, Fort Lauderdale, and North Miami also closed.
Williams, the Hialeah student, said her campus closed in April of 2013, about a month before she was set to graduate.
Williams’ version of the shutdown: Students were kept in the dark about the closure, until they were notified the day before. School administrators said they would take students on a tour of the North Miami and Kendall locations, so they could pick where to finish their program.
Among those most shocked, Williams said, was a student who had enrolled at Hialeah only a week before.
“He just started crying,” Williams said.
Eager to finish her program, Williams agreed to transfer to Kendall. Except the school, she says, kept trying to steer her to North Miami instead, and the start date of classes kept shifting.
Frustrated, Williams dropped out. The Hialeah campus closure entitled her to a refund, but she says she had to fight school administrators for three months on the issue, and received the refund only after complaining to Florida’s attorney general.
“They were like ‘No, we’re only going to refund you half,’ ” Williams said.
In Congress, some lawmakers are furious that Corinthian is still chasing sign-ups. On Thursday, 12 Democratic U.S. senators, including Florida’s Bill Nelson, called on U.S. Secretary of Education Arne Duncan to “immediately prohibit” Corinthian from enrolling additional students.
“Corinthian has shown itself to be one of the worst actors in the for-profit college industry — under investigation by four additional federal agencies and more than 20 State Attorneys General,” the senators wrote.
In the coming days, once Corinthian figures out which campuses it will close — as opposed to trying to sell — it will have to stop enrolling new students at those closing campuses.
But for now, at the more than 100 Corinthian locations, the company says it’s “normal daily operations.” That means continuing new enrollments, with no requirement to warn these new students that their campus is about to either be sold or cease to exist.
Corinthian spokesperson Jenkins said the company is working to keep as many of its campuses open as possible, under whatever new owners buy them. At the schools that are phased out, recently arrived students will be allowed to withdraw, he said.
“Students that enroll in schools that are sold should see few if any changes in their educational programs,” Jenkins wrote in an e-mail.
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