On the governments radar for the better half of the last decade, for-profit schools recently took a hit with the news Corinthian Colleges, which has roughly 72,000 students and owns nearly 100 schools in the U.S. and Canada, is basically closing shop.
An agreement with the federal Education Department will result in one of the biggest for-profit trade schools and college operators selling off its assets.
Corinthian Colleges Chairman and CEO Jack D. Massimino said the agreement provides a blueprint for allowing most of our campuses to continue serving their students and communities under new ownership.
This announcement of Corinthian Colleges closing (they operate Everest Institute campuses) comes on the heels of the U.S. Consumer Financial Protection Bureau and state attorney generals enhancing their investigation into student-lending practices at for-profit colleges. Specifically in question is a predatory lending-like scenario, including school loans provided by outside investors, as well as promises of job-placement post graduation. The Obama Administration is also investigating the use of high-interest rate loans.
The news doesnt come as a surprise to National College Advocacy Group Executive Director Gary Carpenter, who told VOXXI this reaffirms his long-held belief that a lot of for-profit schools are generating students for the sole purpose of getting federal money through Pell Grants or Stafford Loans.
With Corinthian Colleges, $1.4 billion out of their $1.6 billion in revenues last year were from the federal government, Carpenter said. Without the federal government, these schools would close. Thats what it would come down to.
The issue that has plagued the for-profit college industry is a lack of accountability, with Carpenter pointing out newspaper ads and late-night television commercials boast graduates can find high-tech careers.
I dont know how many kids are coming out of there and are really getting jobs, Carpenter said. You always hear the advertisement, I got this fantastic job. My life is turned around. I have no proof, but my gut feeling is that may be the minority of people going through this process, and a lot of kids are probably not completing their degree and therefore they still have these loans they have to pay back.
Someone else who has been paying special attention to the deceptiveness is California Attorney General Kamala D. Harris, who last year sued Corinthian Colleges about misleading the public regarding job placement rates.
In fact, the U.S. Education Department has been after Corinthian Colleges for its job placement data. Recently the government threatened to cut off its federal loans.
As for the future of Corinthian Colleges, per the U.S. Education Department, the for-profit school operator is being allowed to sell off its assets while the government keeps a close eye on federal loan money. However, finding buyers has proven difficult as other for-profit companies are experiencing similar issues.
Look at it this way, you have a school for-profit and the only way they can get cash flow coming in, because these kids dont have the money to pay for school, is to get them signed up for the Federal Student Loan program, Carpenter said. I have to say, when you have so many schools like that across the country, you probably have shareholders you have to report to and the driving force is going to be the bottom line cash flow and profits, and maybe not so much education.