The 20-year Corinthian system is under duress.
Founded in 1995, the publicly traded college consortium (NASDAQ: COCO) operates more than 15 educational institutions located on more than 100 campuses across the United States. The company has been struggling financially and just finished completing a deal with the federal government that will allow it to stay open.
Federal Funds Released
That deal has the U.S. Department of Education releasing $16 million in federal funds to keep the school going. Still, the financially struggling educational entity must sell off some schools while slowly closing down others reports the Wall Street Journal.
Corinthian Colleges (CCi) operate Everest institute, college and university, as well as Heald College and WyoTech. CCi has relied on both organic growth and acquisition to fuel its operation with more than 72,000 students currently enrolled and 12,000 people employed.
CCi has been widely criticized for its marketing practices as the company has run advertisements on the Jerry Springer Show and other serial daytime shows that attract poorly educated viewers. In 2007, the state of California sued the school and then settled its case, alleging that CCi engaged in false advertising. Other investigations have been launched in Iowa and in Florida.
Sell Off or Close Down
The federal settlement will require CCi to sell off certain schools and close down others. The college will “teach out” some students, enabling them to finish their education before shutting down. It is part of a transition plan under a “Memorandum of Understanding” that remains to be finalized. The final agreement is to be in place by July 1, 2014.
Under the MOU, the Department will have full access to the college’s financial and operating records. Corinthian must report progress to the Department in a bid to protect students, faculty and staff as well as to preserve the value of the college. The outstanding loans, too, must also be protected.
Federal Funding
Approximately 80 percent of CCi’s funding comes from the federal government. Those funds are typically available to the college within 24 to 72 hours. Under the terms of the agreement, funds will be delayed by up to 21 days.
Corinthian plans to “…seek new owners for most of its campuses with the goal of entering into definitive sales agreements with one or more third parties for such campuses within approximately six months.”
For-profit colleges have been under scrutiny and have received much criticism in recent years including from President Obama.
In March, the Obama administration proposed a regulatory regimen that if approved could shut down hundreds of such schools. The administration is targeting what it sees as “predatory institutions” that issue certificates and degrees, but ultimately leave students in debt and without marketable skills.
See Also — 5 Colleges That Have Shut Down in Recent Years
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