The U.S. Department of Education and Corinthian Colleges Inc. have agreed to an operating plan that 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 plan calls for an independent monitor that will oversee this process for all programs owned by Corinthian, including Everest, Heald and Wyotech campuses.
“We have accepted an operating plan for Corinthian Colleges Inc. that will protect students’ futures and fulfill the Department’s responsibilities to taxpayers moving forward,” U.S. Education Under Secretary Ted Mitchell said.
“Ensuring that Corinthian students are served well remains our first and most important priority, and we will continue to work with Corinthian officials and the independent monitor on behalf of the best interests of students and taxpayers.”
On June 12, the Department’s Federal Student Aid (FSA) office placed Corinthian on an increased level of financial oversight 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.
In order to ensure that Corinthian can still provide classes for its current students, the Department has agreed to release $35 million in student aid to be used solely for education activities - all of which must be approved by the Department. Under the operating agreement, which is effective July 8, 2014, Corinthian has also agreed to the following:
- Corinthian’s campuses will inform students of their options, and every campus will institute a plan so students can complete their programs without disruption, if they choose to do so. The operating plan will also immediately halt enrollment at schools that are operating under this teach-out provision and require additional notification and disclosures for campuses that are being sold.
- Corinthian will only use federal student aid funds for normal daily operations, including student refunds, payroll expenses (including retention arrangements), accounts payable, interest and related fees, and related professional fees. Corinthian will not use federal funding to pay dividends, legal settlements of lawsuits or investigations, or debt repayments. Additionally, bonuses, severance payments, raises and retention agreements must be reported to the monitor and the Department at least two weeks prior to the creation of contractual obligations and are subject to the approval of the Department.
- Corinthian will hire an independent monitor - approved by the Department - that will have full and complete access to Corinthian personnel and budgets to ensure prudent financial management and see that taxpayer-funded federal student aid dollars are spent well. The monitor will also review teach-out plans and sales of schools, and ensure students have multiple ways to submit feedback and any complaints about the process.
- Corinthian will also make refunds available to students in a number of circumstances. Corinthian and the Department will work together with the assistance of the monitor to establish a reserve fund of at least $30 million for Corinthian to pay those refunds.
- Corinthian will turn over all enrollment and job placement data required by federal law – and overdue to the Department since January - by July 15, 2014.
Corinthian enrolls 72,000 students nationwide, who receive $1.4 billion in federal financial aid annually to support their educations and prepare them for careers.