Everest swims, like its students, in uncertainty

After months of state and federal investigations into its business practices, Corinthian Colleges Inc. has reached an agreement with the U.S. Department of Education to plan the winding down of some of its operations — including its two facilities in Colorado Springs.

The deal, announced Monday, stipulates the creation of an operating agreement by July 1 that will detail either the sale or phasing out of those of Corinthian’s 107 campuses and online presences that receive federal funding within six months, or by the end of 2014.

“Students and their interests have been at the heart of every decision the Department has made regarding Corinthian,” U.S. Under Secretary of Education Ted Mitchell said in a June 23 news release. “We will continue to closely monitor the teach-out or sale of Corinthian’s campuses to ensure that students are able to finish their education without interruption and that employees experience minimal disruption to their lives.”

Ongoing operations of the company’s schools, which locally include Everest University Online (1575 Garden of the Gods Road) and Everest College (1815 Jet Wing Drive), will be overseen by an independent monitor. The post-secondary chain has 340 employees and 250 students in Colorado Springs, said spokesperson Kent Jenkins.

Corinthian has 72,000 students and 12,000 employees across the U.S. and Canada, and receives around $1 billion in federal student loans each year, Jenkins said. The company also is required by July 1 to submit documents pertaining allegations that it falsified job placement data, as well as grades and attendance records. 

Financial oversight by the Education Department increased last week after several months of poor cooperation.

“The Department has requested data from Corinthian multiple times in the last five months to address inconsistencies in the company’s job placement claims for graduates, but Corinthian officials have not turned over the documents,” according to a statement from the Department of Education. “Since January, the Department has sent Corinthian five letters requesting data and other documentation required by law.”

Corinthian still is mandated to allow students, faculty and staff to carry on and is “permitted to continue enrolling new students,” albeit with what appears to be vigorous scrutiny of financial aid eligibility and related issues.

Funding (or lack thereof)

Corinthian Chairman/CEO Jack Massimino explained in a June 19 email to staff that the agreement allows the use of $16 million in Title IV funds, which will keep the schools afloat until finalization of the operating agreement.

That’s only a temporary fix: A 21-day funding delay enacted the same week will remain in effect as Corinthian works on its “transition plan.” Massimino stated that talks with creditors to supply bridge funding have failed and that it is looking toward liquidity to fill the financial gap.

The delay in funding “will adversely affect the timing of Corinthian’s operating cash flows,” according to the email disclosure. “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.”

Massimino further explained that a large part of that search is for potential buyers of its campuses. A filing with the U.S. Securities and Exchange Commission indicates that the Department of Education is “contemplating the denial of recertification or removal of certification of institutional Title IV eligibility,” which is better known as federal financial aid.

In January, the company was denied federal approval to create new programs and establish new locations pending further investigation.

The final phase

Everest University Online terminated 175 positions on Feb. 4, which resulted in the dismissal of 105 employees in the admissions and student finance divisions of its contact center in Colorado Springs.

While the Colorado Springs location of Everest College was unaffected by the layoffs, other facilities including Tampa, Fla., and Tempe, Ariz., saw similar fates.

Corinthian announced in November that its business practices were the subject of multiple federal and state investigations. In January, the company was denied federal approval to create new programs and establish new locations.

On Jan. 24, the company was notified that the Iowa Attorney General’s Office was leading an SEC investigation that included 12 other states (Arkansas, Arizona, Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Tennessee, Washington and Pennsylvania). Many states have issued Civil Investigative Demands seeking documents and answers to inquiries related to student recruitment, organization, tuition, financial aid, enrollment qualifications, accreditation and job placement claims.

In “Degrees of Inequality,” a recently released study of U.S. higher education, author Suzanne Mettler decries for-profit colleges such as Corinthian and the University of Phoenix (which 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 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 their loan, their credit is 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 current and former Corinthian employees, many online students contacted by the company’s local job placement division received little benefit from their education and were virtually unemployable. nCSBJ

Senior Reporter John Hazlehurst contributed to this article.