Corinthian Colleges lured students with lies, lawsuit says

At campuses sprinkled across Florida, Corinthian Colleges promised its students a “better career, a better life” — with classes made affordable by financial aid.

In reality, according to a federal government lawsuit filed Tuesday, Corinthian’s loose definition of a “career” included students who got a job lasting only one day. And the high-interest private loans that Corinthian gave students were so toxic that most students defaulted on them — landing them in financial ruin.

Most of Corinthian’s 10 Florida campuses operate under the “Everest University” brand of schools. Although based in California, Corinthian runs its online operations out of Tampa. The publicly traded company is one of the nation’s largest for-profit operators, with about 72,000 students and 100-plus campuses in 26 states and Canada.

The vast majority of Corinthian’s revenues come from U.S. taxpayers, in the form of federal grants and student loans. Corinthian receives $1.4 billion in federal student aid each year.

“We believe Corinthian lured in consumers with lies about their job prospects upon graduation, sold high-cost loans to pay for that false hope, and then harassed students for overdue debts while they were still in school,” said Richard Cordray, director of the federal government’s Consumer Financial Protection Bureau, which filed Tuesday’s lawsuit.

In a statement, Corinthian Colleges said the lawsuit focuses on “isolated incidents” at its campuses that “violated company policy.”

“The complaint ignores clear, easily obtainable evidence that thousands of Corinthian graduates are hired in permanent positions by large and small employers across the U.S. every year,” the statement said. The company said the private loans criticized in the lawsuit are obtained by less than 40 percent of students, and that the interest rate on those loans is not as high as the lawsuit claims.

Corinthian is in the midst of winding down its operations — the U.S. Department of Education has ordered the company to sell or close its campuses in six months. The federal government says Corinthian “has admitted to falsifying placement rates and/or grade and attendance records at various institutions.”

Cordray’s consumer-protection agency — created in 2010 after the nation’s financial meltdown — has increasingly been scrutinizing for-profit colleges. Many of the complaints against Corinthian, such as lying to prospective students, have been documented at a variety of for-profit schools.

In February, the agency filed a lawsuit against ITT Educational Services, alleging predatory lending practices.

The ITT suit is still pending. The new lawsuit’s allegations against Corinthian include:

▪ Corinthian attracted new students by advertising its high job-placement statistics, but those numbers were often bogus. Corinthian would count a former student as having been employed even if they worked only one day. Additionally, “school employees created fictitious employers and reported students as having been placed with those fake employers.”

▪ Corinthian lied to accrediting agencies and listed 70 unemployed graduates as employed. At another campus, Corinthian listed 366 students as self-employed — a suspiciously high number considering other campuses had only three or four self-employed graduates.

▪ The tuition and fees charged by Corinthian were so high — as much as $75,384 for a bachelor’s program — that Pell grants and federal student loans were not enough to cover them. So Corinthian steered students into additional debt through its in-house loans. Those loans had interest rates as high as 14.9 percent, with an origination fee of 6 percent. More than 60 percent of students receiving those loans eventually defaulted on them.

▪ Students typically don’t have to make loan payments while in school, but Corinthian frequently demanded that its students pay while attending classes. Students who could not pay were publicly shamed by being removed from class. This humiliating practice was so common that one financial-aid employee earned the nickname the “Grim Reaper.” Students behind on their loan payments were also locked out of the school computer system, and prevented from graduating.

In the past decade, enrollment at for-profit colleges has grown tremendously — particularly in Florida. In the 2002-03 school year, for-profits enrolled almost 9 percent of Florida students.

A decade later, that number has shot up to almost 18 percent, compared to roughly 12 percent nationally, according to an analysis by the Institute for College Access & Success.

Florida lawmakers have welcomed the industry’s expansion, even as the schools were criticized for the heavy debts they leave students, and the questionable career value of their degrees.

Right now, with Corinthian under a legal cloud, its colleges continue to operate — and to recruit new students. Federal education officials could have ordered an immediate shutdown, but did not. Instead, the company was allowed six months to find buyers for its campuses.

A few states, including Florida, no longer allow Corinthian to enroll students who are military veterans. But only two states — Minnesota and Illinois — have banned the sign-up of any new students, said the National Consumer Law Center.

Robyn Smith, an attorney who works with that consumer group, called on Florida and other states to join in banning new enrollments. With Corinthian in turmoil, Smith cited media reports in which one student complained of having four different instructors in one week.

“It makes you wonder what kind of education the new students are getting,” Smith said.