The problems with Corinthian Colleges are just the start, top US official warns

US Under Secretary of Education elaborates on Corinthian Colleges investigation

The collapse of Corinthian Colleges is shining a light on a problem in higher education, U.S. Under Secretary of Education Ted Mitchell tells the Los Angeles Times: "Hundreds" of for-profit higher education programs may be unable to prove they help students better their lives.

"As we look at the potential impact of our [new] regulations, the modeling we're doing suggests there are hundreds of programs that will fail to demonstrate that they have provided students with opportunities to improve their economic circumstances," Mitchell tells Times reporter Chris Kirkham. Mitchell promised his department will be "very aggressive" in ensuring students receive what they pay for.


For-profit colleges and universities are in the spotlight after embattled Corinthian Colleges began closing all of its campuses last month and filed for Chapter 11 bankruptcy protection on Monday, saying it has less than $20 million in assets and about $143 million in debt. The move will displace around 16,000 students attending one of the company's remaining 28 campuses, which are located in California, Hawaii, Oregon, Arizona, and New York.

Corinthian's announcement came shortly after the Department of Education (ED) levied a $29.7 million fine on the company's Heald College system for allegedly inflating the job-placement statistics of graduates. The Bureau for Private Postsecondary Education also in April ordered Corinthian to stop enrolling new students at two locations in California.

The colleges' financial issues stemmed from an ED investigation that found the company falsified alumni employment data used to recruit students. That led the government to cut off the company's access to student loans last summer, essentially halting the schools' cash flow.

A data-driven investigation

"We wanted to develop systematic evidence, one way or another, to either support [Corinthian's] claim—or to support the claims of students and graduates, who were saying they weren't getting what they thought they were getting," Mitchell says.

Corinthian officials said they did not have placement rates, grades, or attendance documents that the ED requested so the government "put them on heightened cash signal our level of concern over their operations."

ED officials allowed Corinthian Colleges to continue enrolling students after they realized the company had falsified data in order to protect students, Mitchell says. Early on, it became clear buyers would not step forward if the campuses went under, he says, and the department "didn't feel that it was appropriate to take an action that we knew would make it impossible for there to be a successful transition for those students."

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The sales of those colleges were made both to protect the students' and taxpayers' investments, he says.

Remaining loans

Already, some students who took out private loans have had a significant portion of their debt forgiven, but nine state attorneys general, members of the U.S. Congress, and 100 former Corinthian students are lobbying for broad federal loan forgiveness as well.

"Our laws allow for a clean start for corporations and essentially the students are requesting the same things," says Pauline Abernathy, VP of Institute for College Access & Success, a nonprofit student-debt advocacy group.

In cases where an institution's "acts or omissions...have created real harm," the secretary of education may forgive such loans, Mitchell says, and the department will act "when we see that there has been a violation that reaches that level of materiality."

While personal decisions to enroll do play a part in responsibility, "the basic problem comes when the information on which someone is making a calculated, rational decision is false," Mitchell says (Kirkham, Los Angeles Times, 4/28; Gleason, Wall Street Journal, 5/4; Douglas-Gabriel, Washington Post, 5/4).

The takeaway: Department of Education models predict there may be hundreds of for-profit higher education programs that fail to deliver value to students, and a top official says that "very aggressive" investigations may be necessary.

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