fresh voices from the front lines of change







This week Corinthian Colleges Inc. announced that it had “ceased substantially all operations and discontinued instruction” at its remaining campuses. That should have brought the indebtedness of its many defrauded students to an end.

This “educational institution” was nothing more a profit-making scheme, morally on par with the banks who defrauded homeowners on their mortgages. But while Corinthian Colleges has officially shut down, for most of its students and for a generation enchained by student debt, the need for action remains.

The Fall of Corinthian

Corinthian’s demise was expected, after a series of government actions brought its misdeeds to light and rendered it financially unsustainable. It came on the heels of an order from the state of California to stop enrolling new students. Regulators there cited concerns with the school’s finances, its legal issues, and the misleading reports it had submitted to government agencies.

But, though the closure was expected, its timing left thousands of students in the lurch. It was a final insensitive gesture from a greedy and mismanaged organization.

To the bitter end, Corinthian’s executives refused to take responsibility for their own actions. Instead the corporation’s final public statements – including its announcement to students – blamed government rather than themselves. “Unfortunately, largely as a result of recent state and federal regulatory actions,” read the student announcement, “we were unable to complete a sale, and our only option was to close our schools.”

Corinthian’s executives didn’t tell the public or its students why these actions were taken. They didn’t explain:

● That the state of California sued Corinthian in 2013 for its “predatory” tactics, citing internal corporate documents which described the ideal target customer as “isolated” and “impatient,” with “low self-esteem” and “few people in their lives who care about them.”
● That the U.S. Department of Education took long-overdue action earlier this month by fining Corinthian $30 million for misleading students with inflated job placement rates.
● Or that the Consumer Financial Protection Bureau sued Corinthian in 2014 for deceiving students into indebtedness and using illegal loan collection tactics. (They settled in February of this year, for a reported $480 million in debt relief.)


The CFPB was limited by charter in its ability to protect students. It monitors private loans, which were only 10 percent of Corinthian’s income. But Corinthian managed that 10 percent aggressively – and, according to the CFPB’s data, fraudulently.

Dawn Lueck, former finance director for one of Corinthian’s colleges, talked about her experience with Corinthian’s private loans in a radio interview on The Zero Hour.

“Students (didn’t) even have copies of their loan agreements … or access to their accounts to get clarity (about) their interest rates,” Lueck told me. “When I was a part of the organization and we were implementing Genesis (a private loan program), what really stands out in my mind was the lack of transparency around the design of these loan programs … The website was horrendous to deal with … The employees, the financial administrators, were just as confused as the students.”

The lion’s share of Corinthian’s revenue came from federal student loans, which brought in an estimated $1.4 billion per year. As the Los Angeles Times notes, Corinthian doubled its revenues to $1.75 billion between 2007 and 2011.

The Bailout

The Education Department appears to have neglected its responsibility by failing to identify and stop Corinthian’s deceptive business practices years earlier. And once those problems came to a head, say student debt representatives, the department passed on another chance to help its students.

Student loans can be forgiven when a school goes bankrupt, as Corinthian was about to do. But the Education Department arranged a buy-out for most of Corinthian’s operations instead – not to an educational institution, but to a student debt collection company named ECMC.

Students at Corinthian’s remaining campuses are eligible for debt forgiveness as a result of this week’s closure. But they’re a small fraction of those who have been affected by Corinthian’s misdeeds.

The 100

That larger group of students is being represented by a group of student borrowers known as the Corinthian 100, debt strikers who are refusing to repay their loans. Attorneys general from nine states have taken up their cause by signing a statement asking the Education Department to relieve their debts, nothing that “it is within the [Education] Department’s existing legal authority to help students who have been harmed by these schools.”

The AGs are referring to another provision which allows the department to grant debt forgiveness when loans have been obtained “as a result of violations of state law.” The department has not yet responded to their request.

Representatives from the Corinthian 100 met with officials from the Education Department earlier this month. They received no concrete assurances of assistance – but education undersecretary Ted Mitchell promised to get back to them regarding their demands within 30 days. As the activists observed, “In doing so, Mitchell met at least one of the strikers’ demands: to include the Debt Collective and Corinthian students in the decision-making process going forward.”

The strikers are reportedly scheduled to meet with Education Secretary Arne Duncan in early May.

The Social Good

The abusive practices of for-profit colleges like Corinthian become almost inevitable when education – a social good – is financed by individual debt. These abuses must be addressed, and their victims made whole.

But the broader point remains, and it’s one which Mary Green Swig, Steven Swig, and I made earlier this year: “We believe that today’s student debt has become an unjust burden, not just on individuals, but on society as a whole.”

(Learn more about the Corinthian 100 here.)

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