Six Everest College locations in Washington, run by Corinthian Colleges, are set to close or be sold in the next six months.
The company struck a deal with the US Department of Education (DOE) to close or sell its schools after being investigations by the Attorney General's offices in 13 different states showed the company preyed on low-income students and falsified job-placement rates.
According to US Senator Dick Durbin:
"By inflating job placement rates, they could lure unsuspecting students into believing they were signing up for programs that were successful in getting jobs."
The company denies the allegations, even going so far as to tell Bloomberg News that "by any objective standards, our students do very well."
"They are financial-aid mills," said Rep. Gerry Pollet, (D-Seattle), who has twice introduced legislation to strengthen state oversight of for-profit schools that receive state student-financial aid.
The for-profits "spend a lot of money on recruitment," targeting low-income students who are eligible for federal and state financial-aid programs, Pollet said.
In June, the DOE withheld the company's access to student aid funds for 21 days when Corinthian could not answer questions pertaining to its marketing practices. According to Karen Weise for Bloomberg Businessweek, this aid can make up as much as 90% of revenues at for-profit colleges like Corinthian.
Not wanting the schools to abruptly close their doors, leaving 72,000 students and 12,000 employees without a school, the DOE gave the company $16 million and the option to either sell or close their schools by the end of the year.
Federal law allows students with federal loans attending a school that closes with very little notice to either finish their program at another school or quit the program without having to pay back their loans. If the schools are sold, this option is no longer valid. In the case of Corinthian, that would mean the government would be out $1.2 billion.
Everest Colleges offer training for medical and dental assistants, massage therapists and pharmacy technicians. As of 2012, the campuses enrolled 3,000 students throughout their locations. The school charges $16,000 a year in tuition, receiving most of the monies via federal student aid.
Student aid funding has been denied for the schools for next year.
According to Katherine Long of The Seattle Times, 72% of for-profit institutions recruit low-income students, and have low graduation and job placement rates. The schools account for 31% of student loans, and half of all student loan defaults. This high of a default rate shows that the schools are not providing students with the education necessary to obtain well-paying jobs.
The company was to finalize the deal with the DOE last Tuesday, but missed the deadline.
"We are optimistic that further conversations with the company will produce an acceptable plan in the next few days that protects the interests of students and taxpayers," said Ted Mitchell, an undersecretary of the Education Department, in a statement Wednesday.
Corinthian Colleges is also currently under investigation by the US Department of Justice, the federal Consumer Financial Protection Bureau and the Securities and Exchange Commission.