Why Corinthian Colleges went belly up

Corinthian Colleges, once one of the largest for-profit educational institutions in the country, announced it will close its remaining 28 campuses, effective immediately. How can the government prevent this from happening again?

Corinthian Colleges, a Santa Ana, Calif.-based for-profit education provider, announced Sunday that it will close its remaining 28 physical campuses, effective immediately. About 16,000 current students are affected by the closure.

The school system was one of the country’s largest for-profit educational institutions, with as many as 74,000 students in March 2014. However, after investigations from the US Department of Education, the school faced millions in fines for its misleading – and ethically questionable – practices. With Sunday's announcement that Corinthian will cease all operations, perhaps Corinthian's experience will be seen as a cautionary tale for other schools in the for-profit sector.

The Department of Education began investigating the school’s practices after Corinthian failed to address allegations of misreporting job placement and career success of its graduates last year. Last July, the school agreed to either sell its campuses or close its doors, and proceeded to sell 56 of its Everest and WyoTech campuses to Zenith Education Group in November. On Monday, 28 of its remaining campuses closed their doors.

The announcement comes only a few weeks after the Department of Education slapped the school with a $30 million fine for misrepresentation.

In a statement, Jack Massimino, Chief Executive Officer of Corinthian, said he believed the school’s mission was sound, and that it is unfortunate they had to close:

Colleges like ours fill an important role in the broader education system and address a critical need that remains largely unmet by community colleges and other public sector schools … Overall, our schools did a good job for the students they served. We made every effort to address regulators’ concerns in good faith. Neither our Board of Directors, our management, our faculty, nor our students believe these schools deserved to be forced to close.

Corinthian was fined for allegedly falsely representing the success of its graduates, using inflated job-placement rates to lure current and potential students. They are also accused of altering grades and attendance records. Such recruitment practices allegedly enticed students to take out expensive private loans, which accounted for 85 percent of the college's revenue, reported NBC News. The Consumer Financial Protection Bureau sued the company in September over such practices.

The National Association for College Admission Counseling informs the public that federal and state governments have undergone multiple investigations into for-profit colleges, and have found many instances of those colleges engaging in “deceptive, aggressive and manipulative tactics to enroll as many students as possible … in an effort to maximize profits.” For-profit colleges are able to receive up to 90 percent of their revenue from federal student aid.

According to its latest filings, Corinthian Colleges received $1.2 billion in government loans in its last year of operation. Ted Mitchell, the Under Secretary of Education, said that the Department of Education will do everything it can to help find new placements for Corinthian students so they can continue their education. He said in a statement:

These actions are part of a larger effort by the Department of Education to take strong steps to protect the interest of students and taxpayers. The Obama Administration has led unprecedented efforts to protect consumers from predatory career colleges … Taking strong actions on Corinthian has been an important part of that effort.

He said he hopes the crackdown will be part of the larger effort to keep for-profit institutions accountable:

“[W]e will continue to hold the career college industry accountable and demand reform for the good of students and taxpayers. We hope Congress will join us in that effort.”

This article contains reporting from the Associated Press.