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A for-profit college falters as federal cash wanes

First Published      Last Updated Jun 26 2014 03:17 pm
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Corinthian tried one tactic that seemed counterintuitive. It raised its tuition. Because the total cost was higher, it could receive even more federal loans under the 90 percent rule.

The government requires colleges to disclose what proportion of students earn degrees and what proportion then finds employment in their chosen fields. Kent Jenkins, a Corinthian vice president, told me that across all the company's campuses, 61 percent of students graduate and 69 percent of graduates find jobs. Both figures, he said, are far better than those at many public colleges.

But are they accurate? Since January, the Education Department has been asking Corinthian for data and for calculations for each campus. Because much of that information is already supposedly disclosed to students, obtaining the figures should have been easy, but the department says much of it has not been supplied and that even less supporting data has been provided. That failure to provide information was cited by the department when it said it would delay releasing student loan payments.

The California attorney general's suit contends that Corinthian lied about the data and in some cases arranged for students to be employed for as little as a day by temporary help agencies to say they had found jobs. Jenkins said Corinthian denied the allegations.

The Education Department has been trying to adopt a "gainful employment" rule that would bar student loans for career-education programs, like those offered by Corinthian and its competitors, if too few of their graduates find jobs. The department's first attempt was thrown out by a federal judge, leading it to go through an elaborate rule-making process, which is supposed to lead to a proposed rule in October. The colleges complain bitterly that the rules being considered would be unfair and lead to millions of students being unable to pursue education. They are certain to sue again, and could prevail.

But what is happening to Corinthian now may indicate that the department can, under current rules, take action against particularly bad colleges.

If, as critics contend, many Corinthian students are going deeply into debt to gain useless educations, some of those students might have been better off if the Education Department had stuck to its guns and forced Corinthian to close. Federal student loan rules do not require students to repay loans taken out for programs that were canceled while they were enrolled, leaving them unable to graduate.

"This is truly an American tragedy," said the consumer bureau's director, Richard Cordray, in announcing the suit against ITT. "Students may think they are climbing a ladder to success when instead they are getting knocked down, crushed by student debt that does not help them gain a better job or a better life."