In 2010 Corinthian Colleges had more than 100,000 students. There were 105 campuses and they produced revenue of $1.7 billion, most of it coming from federal student loans. It was one of the biggest educational organizations in the country. Its CEO, Jack Massimino, was flying high too, making some $3 million that year.
Five years later the jig was up. On April 26, 2015, NBC News reported: “In what’s believed to be the biggest shutdown in the history of higher education in the United States, Corinthian Colleges said Sunday it’s closing its remaining 28 for-profit schools effective immediately, kicking about 16,000 students out of school.”
The Corinthian story is one of a spectacular rise and even more spectacular fall, all in a space of 20 years. It went from nothing to one of the largest educational institutions in the country. Then it disintegrated amidst a dumpster fire of government investigations, student lawsuits and plummeting stock prices, selling off some units, closing the rest and filing for bankruptcy.
The idea for Corinthian Colleges started with a small group of executives at a non-profit trade school in Southern California, National Education Centers. They built a behemoth by acquiring other trade schools. They acquired Blair College, Florida Metropolitan University, Tampa College, Las Vegas College, the National Institute of Technology and more than 15 others. Corinthian operated under a number of brand names, including Everest College, Heald College and Wyntech. Programs were offered in the fields of health care, business, criminal justice, transportation technology and maintenance, construction trades, and IT.
By 1999 Corinthian floated an IPO. Along the way, it had attracted major investors including Wells Fargo, Goldman, Sachs and CALpers (California Public Employees’ Retirement System).
For private equity interests looking for a recession-proof investment, for-profit education seemed ideal. The recession of 2008 further fueled Corinthian’s growth. The Huff Post reported: “The fortunes of for-profit colleges tracked the Great Recession in reverse: Corinthian’s stock price more than doubled between March 2008 and February 2009, just as unemployment spiked; enrollment increased more than 50% between fall 2008 and fall 2010. Widespread layoffs left people scrambling to acquire additional skills to compete in an impossible job market. And Corinthian recruiters sold prospective students on a dream: graduating college and ascending into the middle class, with career training that would pay off.”
The sales tactics themselves were better suited to a fly-by-night used car lot than to a college. Reveal, the web site of the Center for Investigative Reporting, noted, “Many Corinthian admissions officers were former telemarketers, records show. The company regarded them as salespeople, a training manual emphasized; interactions with prospective students were focused not on finding an educational program that fits a student’s needs, but on ‘closing the sale.’
“When prospects expressed interest, recruiters moved aggressively to reel them in, with a barrage of boiler room-style phone calls and intense face-to-face contact.”
Corinthian promoted itself on the Internet, it ran telemarketing campaigns and TV ads on trashy talk shows like Jerry Springer and Maury Povich. Their target was low income students who would easily qualify for federal assistance. The Consumer Financial Protection Board (CFPB) stated in a lawsuit it filed against Corinthian that 35% of its students had incomes of less than $10,000.
While low-income students may have been the target, this did not equate to low-cost offerings. Everest College in Southern California charged $41,000 for an associate of science degree in paralegal studies. Neighboring Santa Ana Community College offered a substantially similar program for $2,400.
Ultimately they proved to be snake-oil salesmen, making promises their institution couldn’t keep. Annual dropout rates at some of the campuses were in the neighborhood of 60%. The CFPB lawsuit was one of more than 100 that were filed in federal courts against Corinthian.
In 2013, California Attorney General Kamala Harris filed a lawsuit against Corinthian for false advertising and deceptive marketing targeting vulnerable students and for misrepresenting placement rates to prospective and current students. California won a $1.1 billion judgement against Corinthian but not until 2016 after the company had folded.
In 2014 the Department of Education fined Corinthian $30 million for misrepresenting placement rates for Heald College.
That same year the CFPB charged Corinthian with using illegal tactics to collect on the private loans that were marketed to students. Because federal regulations limited colleges from receiving more than 90% of their revenue from federal funds, Corinthian had created its own private loans, called Genesis loans, to make up the difference. The three-year default rate on these loans, which carried 14% interest, was 60%. The CFPB won a $531 million judgement, but again it was after Corinthian had disappeared.
In 2015, the Province of Ontario withdrew Corinthian’s operating licensing causing the company to close all of iits Canadian campuses.
By April of 2015, it was over. But not for the 16,000 students left hanging when their college closed almost literally between classes. Just about every one of them was paying for what would turn out to be a useless incomplete course of study with loans that they were still expected to pay back. Initially the Department of Education was sympathetic. The department issued a statement in March of 2016 stating “…students who were defrauded at 91 former Corinthian College Inc. campuses nationwide have a clear path to loan forgiveness under evidence uncovered by the department while working with multiple state attorneys general.” U.S. Education Secretary John B. King commented, “Corinthian was more worried about profits than about students lives.”
Things changed for these students with the election of Donald Trump and his appointment of Betsy DeVos as education secretary. USA Today in 2018 reported on a changed approach at the DeVos Department of Education: “After reviewing student loan borrower claims and other records, the department determined 51 Corinthian programs had met guidelines for instruction that leads to gainful employment, while six had failed. As a result, education officials in December established a new procedure that would vary the loan forgiveness percentage for former Corinthian students and similar borrowers.”
These changes landed DeVos in court. She lost. In a class-action lawsuit DeVos was found to be in contempt of court for continuing to illegally collect on loans made to Corinthian Colleges students. The Department of Education was fined $100,000.
Meanwhile the Securities and Exchange Commission was left to deal with Corinthian management. Los Angeles Times business writer Michael Hiltzik noted how that turned out: “Corinthian Colleges was a higher-education scam that defrauded tens of thousands of low-income students out of as much as $100 million in federally backed loans. Many are still struggling with the consequences because the Trump administration is refusing to grant them full relief from their student debt.
“The Securities and Exchange Commission just settled its lawsuit against Jack D. Massimino and Robert C. Owen, the leading perpetrators of this deception, for a pittance.
“The penalties imposed for their alleged violations of securities laws: $80,000 against Massimino and $20,000 against Owen. Neither had to admit wrongdoing and neither is barred from serving again as an officer or director of another publicly traded company.”
So these profiteers were fined less than what some of their student victims owed on their loans.