Corinthian Colleges Inc. announced Monday it would close all of its colleges and cease operations. The for-profit college operator's closing is the end of a long struggle between federal authorities and the for-profit college industry, which has been accused of profiting from student loan debt.
Corinthian had high prices and its degrees sometimes left students with high debt, but few job prospects. And the school recruited poorer students — those most likely to qualify for federal financial aid, says Christine Lindstrom, Higher Education Program Director of the U.S. Public Interests Research Group.
"Colleges like Corinthian have been violating the spirit of federal aid programs for at least a decade, if not more," Lindstom says.
Lindstrom says Corinthian received roughly $1.4 billion each year in federal money through its students' financial aid packages.
Corinthian's troubles took a turn for the worse in June 2014 when the government put a 21-day hold on its funds after the school failed to provide proof it wasn't inflating its job placement statistics. That forced the company to begin to cut back its operations.
But even as Corinthian crumbled under federal pressure, other for-profit colleges and universities began to change some of their practices. A proposed "gainful employment" rule, currently held up in court by lawyers for the lobby representing for-profit colleges, would jeopardize for-profit colleges' access to federal money if graduates used more than a certain percentage of their income to service their student debt.
"Colleges have, in anticipation of it going into effect, already made changes to end some of their worst performing programs," explained Pauline Abernathy, vice president of the Institute for College Access and Success.
If the regulation goes into effect in July as planned, it would mean that for-profit schools would have to ensure that graduates find well-paying jobs to offset large amounts of college debt.