Corinthian Colleges Has agreed to sell half of its campuses including some Everest and WyoTech schools.
Embattled for-profit college chain Corinthian Colleges, the operator of schools like Everest, Heald and WyoTech, found a buyer for at least half of its campuses in the form of student-loans servicing company Educational Credit Management Corporation (ECMC).
Bloomberg reports the $24 million deal includes the sale of 56 schools under the Everest and WyoTech brand, 12 of which are in the process of being closed.
The acquisition, which affects more than 39,000 students, does not include the transfer of liabilities related to litigation or private student loans. It also does not include any of the Heald-brand school or the 13 Everest and WyoTech schools that sued Corinthian last year for false adverting.
The company says that $12 million of the purchase price will go to the Department of Education, while $8.5 million will be placed in escrow.
For its part, Minnesota-based ECMC, which is making the purchase under the name Zenith Education Group Inc., said it plans to take the school nonprofit, reduce tuition by 20% and introduce strict accountability standards for program completion and job placement rates.
ECMC, which has an exclusive government agreement, is a nonprofit organization whose stated purpose is to prevent student loans from entering default. The group guarantees loans made by banks and other private lenders and promises to repay lenders if borrowers don’t. If the agencies can’t recover the money, the federal government takes over the loan, shifting the risk to taxpayers.
In January, Consumerist reported on the company’s efforts to push back against the idea of allowing loans to be discharged in bankruptcy, ensuring that student debt is as permanent as possible.
Bloomberg reports the company came under fire two years ago for its high fee charges and the compensation of its CEO. Critics have said the company is reaping the benefits of former students’ struggles.
The first sale of CCI schools comes nearly four months after the company reached a deal with the Dept. of Education to sell or close its campuses.
That deal was necessitated earlier this summer when CCI failed to turn over documents related to a number of state and federal investigations related to the company’s recruitment and marketing practices. At that point the Dept. of Education put a hold on CCI’s access to loan funds, effectively signing its death certificate.
Despite its plan to close or sell off campuses, CCI continues to be face criticism and a plethora of issues from regulators, states and investors.
Just yesterday, the Los Angeles Times reported that CCI was not in compliance with Nasdaq rules after failing to file financial reports for the last two quarters.
Officials with the company say they received its second warning from Nasdaq in two months and had until November 28 to submit a plan for getting back on track. If the company is unsuccessful in correcting the financial reporting issues, it could be delisted from the stock exchange.
In addition to the financial problems, the company continues to be served with lawsuits. In September the Consumer Financial Protection Bureau filed a complaint seeking to provide nearly $560 million in restitution to students who were pushed into predatory loans with through the for-profit institution.
Less than a month ago, the state of Wisconsin filed a suit against CCI, alleging that its Everest brand misrepresented information, like graduation rates and job-placement statistics, in order to attract students.
Corinthian to Sell Half Its Schools to Loan Servicer ECMC [Bloomberg]
Corinthian Colleges again runs afoul of Nasdaq listing rules [The Los Angeles Times]
by Ashlee Kieler via Consumerist
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