Corinthian Colleges Inc. will put 85 of its campuses in the United States up for sale and "teach out" the other 12 under a deal finalized with the U.S. Department of Education on Thursday night. Separately, it will sell its 10 campuses in Canada.
The campuses it won’t be selling enroll a total of about 3,400 students, or about 5 percent of the for-profit higher-education company’s overall enrollment.
In a news release issued late Thursday, the department said the agreement "provides students at the company’s career colleges a chance to complete their education and protects taxpayers’ investment while Corinthian works to either sell or close its campuses across the country in the next six months."
The agreement comes two weeks after the department heightened its financial oversight of Corinthian and withheld financial-aid payments, exacerbating a cash-flow crisis for the company that it said would threaten its very existence. Days later, Corinthian and the department announced an agreement for the company to sell or wind down operations on all of its campuses over the next six months under a plan that was expected by July 1 but that took until late Thursday to be finalized.
The department said it had taken the action "after the company failed to provide records concerning enrollment and job-placement data required by federal law, and failed to fully address concerns about its practices, including faulty job-placement data used in marketing claims to prospective students and allegations of altered grades and attendance."
The names of the colleges to be put up for sale won’t be made public until the company provides further disclosures on Monday. On campuses designated for "teach outs," Corinthian will maintain enough staff and faculty members to allow enrolled students to complete their programs. Some advocates for students, concerned that the department wasn’t doing enough to protect students’ interests, have urged it to also offer loan discharges to students in colleges that are to be sold.
An Independent Monitor
Under the agreement, Corinthian will hire an independent monitor to oversee all operations.
Enrollments on the teach-out campuses will be halted immediately, the department said, and Corinthian will make refunds available "in a number of circumstances." The department said it would work with Corinthian to establish a $30-million reserve fund for the refunds.
Corinthian has also agreed to suspend enrollment of new students on all campuses until July 8, 2014, when it and the department expect the yet-to-be-identified monitor to be in place.
The department will release $35-million in federal student aid to Corinthian so it can continue to operate the colleges in the interim, with the stipulation that all the money go toward educational costs. "Corinthian will not use federal funding to pay dividends, legal settlements of lawsuits or investigations, or debt repayments," the department said. The company may use the money to pay bonuses, severance payments, raises, and retention agreements, but only with the notice and approval of the monitor.
"This agreement allows our students to continue their education and helps minimize the personal and financial issues that affect our 12,000 employees and their families," Corinthian’s chairman and chief executive officer said on Thursday in a prepared statement. "It also provides a blueprint for allowing most of our campuses to continue serving their students and communities under new ownership."