Since for-profit juggernaut Corinthian Colleges (COCO) announced it was shutting down or selling its 97 U.S.-based schools this month, the fate of its 72,000 enrolled students has been the subject of speculation.
Not much has been said about a much larger group of Corinthian students: the hundreds of thousands of people who already paid for a degree from the company.
Thanks to a quirk in federal law, only a sliver of students can get their debt forgiven when owed to a school that shuts down. Students are obliged to pay off student loans to a shuttered school unless they were attending class within 120 days of the school’s closing. This means that most everyone who graduated with student debt more than four months ago from Corinthian—which is closing amidst accusations by California’s attorney general that it deceived students and falsified job placement records—is left with a degree of dubious value and loans that will be virtually impossible to discharge.
“You have a company that for years has been offering education of a questionable quality that comes from mounds of debt,” says Ben Miller, a senior analyst at the New America Foundation. “For the students who have gone through years ago, there’s going to be no restitution for them, even if they’re in horrible shape.”
Students currently on the books at the 12 Corinthian schools preparing to close down will—at the discretion of the company—either complete their course of study on campus, finish their degree at a fresh institution, or get a refund. According to the agreement between the government and Corinthian, students disagreeing with the college officials’ recommendations will have to appeal the decision. That provision has some worrying that the administration is leaving current students’ futures in the hands of unreliable custodians.
“I’d be concerned about students getting the forgiveness they are legally entitled to,” says Miller. “The Department [of Education] is giving Corinthian a lot of leeway to make the decision to put students on a path to complete or to receive a discharge.”
A spokesman for Corinthian Colleges, Kent Jenkins, notes that the policy of allowing students to finish their degrees is longstanding, and he disputes that it will hurt enrollees. “Students in fact are able to reach a successful completion and get the credentials and skills that they enrolled in our schools to get,” he says. He adds that, like any institution of higher education, Corinthian is governed by federal law that imposes strict restrictions on bankruptcy relief for student debt. “There’s absolutely, positively nothing that has happened as a result of our agreement with the Department of Education that changes the status of federal law,” he said.
Court documents indicate that the average Corinthian student pays $40,000 for an associate’s degree. A New America Foundation analysis of government data suggests that a Corinthian graduate earns around $17,000 per year, which is roughly $2,000 more than a minimum wage worker makes. Corinthian has said that about one in 5 of its alums default on their loans. Outside analysts put the share of defaulting students at closer to one-third. Defaulting can sink a credit score and make it harder to purchase basic things such as a cellphone plan or utilities.
Corinthian defended itself in court for years against charges it misled students. Several attorneys general have launched probes into the company, which does a brisk business in federal student aid. Corinthian received $1.4 billion in government loans last year—nearly 90 percent of its total revenue.