This Monday, one of America’s largest for-profit career education chains, Corinthian Colleges Inc. filed for bankruptcy, after a year-long and gradual collapse which was prompted by the U.S. Department of Education’s probing watch. The watch was a result of serious allegation of deception on the behalf of the school chain.
The story escalated quickly after the summer of 2014 when Corinthian colleges were involved in a dispute with the Department of Education over paperwork. More precisely, the Department discovered years of malpractice where the Corinthian colleges deceived students with false job placement rates and graduation rates as well.
Since the start of the 2010-2011 academic year, the Corinthian’s students received around $4 billion in federal student loans and around $2 billion in grants which almost entirely flowed to the school chain as fees and tuitions. At its peak, the chain had more than 110,000 students enrolled in over 120 colleges across the country.
The Education Department discovered almost 950 false job placements, which showed “blatant disregard” for the federal student loan program. In short, without the jobs that were promised to the students, after graduation, they were unable to find employment and subsequently pay off their loans.
This has resulted in the Department of Education becoming more stringent with their funding of various programs and the reduced flow of cash into the Corinthian schools. It did not take long for the whole house of cards to collapse, with the chain currently owing $143 million in debts, while their assets are $19.2 million, urging the chain to declare bankruptcy.
It goes without saying that this has led to the closing of all the Corinthian colleges, leaving almost 3,000 employees jobless and leaving tens of thousands of students to fend for their future, burdened by student loans.
An Education Department spokeswoman, Denise Horn said:
“The department remains committed to protecting students and ensuring that those who have been hurt by fraud — including at Corinthian — receive the debt relief they are entitled to.”
We certainly hope that this will happen and that the students will be protected.