Less than a week after Corinthian Colleges Inc. announced a 21-day federal funding suspension by the U.S. Department of Education, a company executive has said that its more than 100 campuses will remain tentatively operational.
In an email to its staff Monday, Corinthian Chairman and CEO Jack Massimino said the company has “reached an agreement in principle that allows us to maintain uninterrupted operations at our schools (ground and online) until a more detailed plan can be finalized by July 1.”
Massimino explained that the agreement allows the use of $16 million of Title IV funds, which will allow the schools to operate minimally. The 21-day funding delay is still in effect and Corinthian will continue to work on a “transition plan” while producing necessary documents to the Department of Education.
Massimino also said in the disclosure that the company “will continue to seek new owners for most of [its] campuses with the goal of entering into sales agreements within six months.” The company will also work to transition students out of its under-performing schools, either by means of graduation or transfer, the document stated, and will not enroll students in those programs.
Among those campuses are Everest University Online (1575 Garden of the Gods Road) and Everest College (1815 Jet Wing Dr.), which together employ 340 in Colorado Springs.
Corinthian Colleges — a for-profit system based in Santa Ana, Calif., with around 75,000 students nationwide — stated in a disclosure that the U.S. Department of Education’s decision to suspend funding was a result of “outstanding documentation and data that the company had yet to provide.”
The move by the Department of Education comes after months of federal and state investigations into the company’s business practices. Documents indicate that Corinthian has remained uncooperative in providing the feds with information related to inconsistencies in various student data.
The delay in funding “will adversely affect the timing of Corinthian’s operating cash flows and is expected to result in significant shortfall in the company’s operating cash flows,” according to a disclosure last week. “If such relief is not provided, the company’s existing cash balances will be insufficient to sustain it through this transition period, and therefore the company would need to immediately obtain other sources of liquidity, which may not be available.”
The company stated that talks were had with credit lenders, who refused to provide funding to help the college system bridge the financial gap.
Associated Press reported Corinthian Colleges Inc. receives $1.4 billion in federal financial aid each year.
In “Degrees of Inequality,” a recently released study of the U.S. higher education system, author Suzanne Mettler decries for-profit colleges such as Corinthian and the University of Phoenix (which also has a campus in Colorado Springs).
Mettler indicts these institutions as predators, skilled in persuading low-income and minority students to sign up for expensive, federally financed programs, often online, that fail to provide even rudimentary job skills. Students thus deceived find themselves severely indebted (average: $32,700), far more than their counterparts at private not-for-profit colleges ($17,700). The result: They can’t pay off the loan, their credit is permanently impaired and the federal government is left holding the bag.
“We now spend one in four of our higher education dollars sending students to these colleges,” Mettler wrote, “and for that we reap a new underclass of highly indebted individuals, most of whom do not manage to complete their degrees.”
According to several current and former Corinthian employees, many online students contacted by the company’s Colorado Springs job placement division apparently received little benefit from their education, and were virtually unemployable. In addition, many lived in remote rural locations and either lacked transportation or were hampered by child care obligations.
Corinthian Colleges Inc., whose stock trades on NASDAQ, was at 0.34 per share Friday after closing at 0.85 on Thursday. The stock, COCO, rose slightly to around 0.46 per share Monday morning.