Having determined that Corinthian Colleges, Inc. had been slow to respond to their request for further documentation on job placement results, The US Department of Education is going to put additional constraints on the cash flows of the for-
The most significant action will be the placement of a new 21-day hold on all federal grant funds intended for the school. Corinthian now has to document the Title IV eligibility on a student-by-student basis for each disbursement. Normally, a school gets those dollars in as little as twenty-four hours. That will hit Corinthian's cash flows at a moment when their reserves leave them without much liquidity. According to a Regulation FD Disclosure filed today:
The Company is seeking relief from ED for the 21-day waiting period required by the June letter, but has been unsuccessful to date in its efforts to obtain such relief. If such relief is not provided, the Company's existing cash balances will be insufficient to sustain it through this transition period....the Company has engaged in discussions with its credit facility lenders in order to obtain financing to bridge the shortfall in operating cash flows during this transition peiord, but the lenders have indicated they will not provide any such financing."
Oh, and if Corinthian decides that selling a few campuses might make up for some short-term cash flow problems, then it has to let the Department of Education know about that, too.
So what's the beef?
The Department asked Corinthian to release data on how well its students were doing - while they were in school and then once they left.
It was not too long ago that approximately three in every ten Everest students defaulted on their federal student loans within the first two years of leaving school. The costs to taxpayers of funding such an operation, given the scope of Everest's student body, are quite serious.
A report out this week ("Ensuring Educational Integrity: 10 Steps to Improve State Oversight of For-Profit Schools") from the National Consumer Law Center says that Corinthian Colleges has been the object of twelve government lawsuits or investigations since 2004. To the point about data on job placement, the Attorney General of Massachusetts quoted a former Corinthian employee as saying "Corinthian's policy is that a student is considered 'placed' once that student has been employed for at least one day." But if that is true, then it is also within the law. There is no definition for what kind of level of employment qualifies as "placed."
For-profit schools tend to concentrate their offerings into curriculum designed to lead to employment. People enroll in a medical assistant program or in a culinary academy because they want to find a job. But they also tend to draw from different strata of society than do some of our nation's well-known public and not-for-profit private institutions. Students at for-profit schools are more likely to be the first person in their family to attend a post-secondary institutions, more likely to be a minority, more likely to come from a low-income family, and more likely to have grown up in a household where English was not the first language. Most of those factors certainly contribute to challenges in educational attainment. Their best counterpart in public education would generally be community colleges. Thus, it probably should be acknowledged that the graduation and job placement rates from those institutions are generally similar and in some cases worse.
But one key difference is the opportunity cost. No one borrows twenty or fifty or one hundred thousand dollars to go to a community college.
Here is one of the promotional videos designed by Corinthian Colleges, Inc. to recruit students to its Everest College division. I think you will like it.
A spokesman for Corinthian declined to make a comment.