Is Corinthian Typical of the For-Profit College Industry?

Corinthian Colleges Inc. was once one of the nation’s largest for-profit college chains, enrolling tens of thousands of students in career programs as the recession displaced millions of workers.

Now the Santa Ana, Calif., company is almost out of business. On Sunday, Corinthian announced that it would close more than two dozen of its remaining schools, leaving 16,000 students scrambling for alternatives.

Corinthian’s downfall came after the U.S. Department of Education began investigating whether Corinthian had falsified job-placement rates, which it used to recruit students. The chain’s collapse was set in motion last summer, when federal education officials cut off Corinthian’s access to student loans, crippling the company’s cash flow.

The Los Angeles Times sat down with Ted Mitchell, the Education Department’s undersecretary, who oversaw most of the Corinthian investigation.

Q: Let’s start at the beginning. Bad news has been spilling out about the for-profit college industry for years. What made your department focus on Corinthian?

A: The Corinthian problem really started out as a data problem. We’d heard all of this stuff bubbling up, and we wanted to develop systematic evidence, one way or another, to either support their claim — or to support the claims of students and graduates, who were saying they weren’t getting what they thought they were getting. So we worked to collect data specifically on placement rates, and later on grades and attendance. We found that Corinthian couldn’t produce the documents that we needed, and so we went back and forth with them for a number of months about our demands to actually get the information.

Q: Did they just not provide anything, or did they not provide what you were looking for?

A: A little of both. At first they weren’t providing information and said they couldn’t find it. Then they would provide information that wasn’t responsive. So it was at that point that we decided we needed to press the case. We put them on heightened cash monitoring, in order both to get better responses to our data requests, and to signal our level of concern over their operations.

Q: Is Corinthian an isolated bad actor, or are there systemic problems in the for-profit college industry?

A: 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. The department will continue to be very aggressive in making sure that career colleges live up to what they say they’re going to do for students.

Q: Recently, nine state attorneys general, members of Congress and a group of more than 100 former Corinthian students have asked for a broad forgiveness of federal student loans tied to Corinthian schools. Where are you in considering those requests? Is this realistic?

A: It’s clear in statute and in regulation that the secretary (of Education) has the authority to act in cases where acts or omissions on the part of an institution … have created real harm. When we see that there has been a violation that reaches that level of materiality, we will act.

Q: Some have questioned whether the department’s push to sell so many schools was less about the students and more about avoiding a hit to taxpayers if Corinthian closed overnight, which would allow loan refunds. What would you say to that criticism?

A: The student consideration was the first consideration. But we also think the taxpayer has made an investment in these students, and that the taxpayers’ investment — as well as the students’ investment — ought to be protected.

Q: I also get emails from readers who question why students should get a refund. Some say they made a decision to enroll, and you’ve got to live with your decisions.

A: There’s absolutely no question that personal responsibility is important in all of the decisions that students make. The basic problem comes when the information on which someone is making a calculated, rational decision is false.

Q: Why did you allow Corinthian to continue enrolling students after it became clear that the company had falsified job-placement rates and that it was in deep financial trouble?

A: We knew from the analysis in the very early days that buyers (of Corinthian schools) wouldn’t step forward unless these campuses were (staying afloat). So until we were finished with our investigations, we 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.

Q: Will Corinthian executives be held accountable for the disruption to so many students’ lives?

A: Our tools for holding executives responsible individually are limited.

This article appeared in print in the April 30th, 2015 edition of Hamodia.