The company is now winding down its ownership. The purchasing company is the nonprofit Zenith Education Group, which will be buying 56 Everest and WyoTech campuses covering 17 states, as well as Corinthian's online courses. Chelsea Dulany and Alan Zibel, writing for The Wall Street Journal, explain that Zenith is owned by Oakdale, Minnesota-based ECMC Group, Inc., a company which provides guarantees for federal student loans and collects loan payments on private student loans. Zenith will finish the wind-down of the 12 schools it is acquiring from Corinthian, as part of the deal that will likely close in January.
ECMC Chief Executive David Hawn says the plan is to focus on reducing student debt, increasing the rates of student job placement, and improving transparency. Before the turnover, Corinthian was already under several federal and state investigations over marketing tactics, such as allegedly falsifying information about student job placement, altering grades, and keeping inaccurate attendance records. ECMC is planning on cutting tuition by 20% for incoming students at most Everest programs, and will be offering millions of dollars in grants each year.
The US Department of Education has offered its support of the sale, which it will have to approve along with state authorizing agencies and accreditors. The DOE says this sale will give opportunity to almost 40,000 students to finish their degrees.
"We are pleased to help students transition from a problematic for-profit company to a nonprofit that is committed to giving students a new start and more opportunities for success," Undersecretary Ted Mitchell said in a statement.
Others, however, are not sure that ECMC is ready to take on this educational role, since its track record as a debt collector for federal student loans is spotty.
"It's extremely disappointing," said Maura Dundon, senior policy counsel at the Center for Responsible Lending. "This is a company with a poor record in what it does doâ¦It has no background in providing educational services."
The Obama administration has often pointed to for-profit colleges as the driving force behind the rise in student debt and defaults. The colleges have also been accused of high-pressure recruiting matched with poor-quality education. Rohit Chopra of the Consumer Financial Protection Bureau is pleased that part of a suit CFPB has against Corinthian Colleges, Inc. will retire student loans owned by Corinthian. The Nasdaq Stock Market also sent a letter to Corinthian after it did not file its financial results for the September quarter. The company must submit a plan to Nasdaq by November 28 to regain compliance.
The peak market value of Corinthian Colleges, Inc. was $3 billion in 2004. The Santa Ana, California-based business says that in July, the DOE imposed a 21-day waiting period on its access to federal aid, which created a critical cash-flow situation. Bloombergâs Chris Staiti and Michael McDonald report that ECMC is aiming at doing things differently than Corinthian.
"We are not a successor to Corinthian," ECMC Chief Executive Officer David Hawn said in a phone interview. "We're a nonprofit company that has a very different model in mind on how to deliver career education to students."
The deal is going to allow students to continue their education with no interruption. This will also save the government the cost of rebating tuition, the normal practice when a school closes.
Last week, Corinthian stated that the process of selling its campuses is impeding their efforts of getting a clear picture of the company's finances. If a company does not submit a plan to get back into compliance in a timely manner, the company will be subject to "delisting", according to Chris Kirkham of the Los Angeles Times. At this time, the company's stock price is right below 20 cents after the agreement to sell off their schools. The company has received a grand jury subpoena from the US attorney's office in Los Angeles, and more than a dozen attorneys general are investigating the company.
The Associated Press reports that Corinthian stated this week that selling the company's campuses was necessary because the DOE has placed "significant constraints" on its resources, which is preventing the company from assembling the data needed to complete and file its quarterly financial reports.