USED Continues To Support Predatory Colleges

The Department of Education is pleased to announce that their program to preserve the school-to-debt pipeline is proceeding apace.

You may recall that the USED once declared they would crack down on predatory for-profit flim-flam artists masquerading as colleges. You may also recall that, when presented with an exceptional example of a chain of egregious sharks, the USED finally stepped in to preserve the interests of everyone except the students involved in the massive scame.

I've covered the story of the USED and Corinthian Colleges before; the more detailed version is here. Let's look at what today's cheery press release actually says.

Zenith Education Group has announced that they have finished glomming up fifty-some campuses from Corinthian College, in a deal that has been under construction since November.

Zenith is a subsidiary of Educational Credit Management Company. ECMC is a debt collection company, specializing in chasing down student loan repayment. Apparently they have pursued those debts a bit overzealously at times, but here they are, cutting out the middle man. Exactly what expertise the "newly created" Zenith has in operating colleges (other than chasing the debts that students run up paying tuition to them) is not clear. But the removal of the middle man allows Zenith to turn these for profit schools into non-profits. After all, I don't have to make money collecting tuition from you if I can make money from selling you the loan for the tuition money.

When they call Zenith "newly created," they aren't kidding. Bizapedia shows them forming in December of 2014. The company is filed in Florida, but it operates out of Oakdale, Minnesota (the six principals are Gary M. Cook, John F. Depodesta, Daniel S Fisher, David L. Hawn, James V. McKeon, and Gregory A. Van Guilder) at 1 Imation Place in the same building as the other ECMC offices reside, plus Premiere Credit of North America LLC. Cook was or is the director of ECMC Technology Services Corporation. DePodesta is the ECMC chairman of the board.

Zenith's interim president is Troy A. Stovall, who "comes to the position with eight years of leadership experience in nonprofit higher education administration and a distinguished background serving in various management consulting and advisory roles." So he totally knows about education. Most recently he was the Executive Vice President and Chief Operating Officer for Howard University, but he also runs his own consulting firm; his LinkedIn profile includes a plug for Time Driven Activity Based Costing, so apparently he speaks fluent consultantese. He's also a principal at something called Oak Forest Ventures, "a solutions firm dedicated to substantially improving the profitability of its clients."

Are you getting the impression that this is way more about business and money than about education and a future for students?

Zenith has a chirpy new website. It touts the qualities of, but does not list by name, its "employees." So, not a faculty, I guess. And they have a whole tab devoted to their partners:

We intend to graduate high-performing, highly skilled students from our schools, and our new partnership program will identify high-quality employers in industries with clear local workforce needs that are sufficiently equipped to support students as they work to embark upon their new careers.

One can hope that will become a bit more concrete and nailed down, as one of Corinthian's many scam-related issues was its tendency to create fake employment for its students to hide its lousy job placement record. This is not great for schools specifically devoted to preparing students for a place in the workforce.

A look at the "our schools" tab confirms what news reports imply-- Zenith has no schools in its chain other than the ones it just grabbed from Corinthian.

That grabbage depended hugely on the USED's involvement. So when they said that they would drop the hammer on predatory colleges, apparently by "hammer" they meant "big fluffy hammer sculpted out of money." Truthout tells the story and makes the case that the USED is saving a chunk of its own bacon. If Corinthian had simply gone belly up or been shut down by the feds, some students would have had the option of a get-out-of-loans free cards, which could have cost the USED a few hundred million bucks. The USED has reportedly been making big bucks from student loans, so anti-shark measures may not be in their business interests.

As part of the deal, "the parties agreed to pay the Department $12 million in an up-front payment, and up to an additional $17.25 million earn-out over the next seven years that will be used to benefit Corinthian students." The Department is announcing a $480 million loan forgiveness plan for borrowers who paid their way to Corinthian with high-cost private loans. Who this covers is not clear from the USED press release, but in any version, it's not much help. If the $480 mill is split over the 30,000 students who just became assets traded from Corinthian to Zenith, that's about $16K. If we add in current Corinthian students as well, it's closer to $7K. The press release says this money will also help past Corinthian students get a fresh start, so that $480 mill is looking tinier and tinier.

The USED also cheerfully reports that Zenith has agreed to all manner of swell things, like voluntarily hiring an independent monitor, which is right up there with politicians setting up ethics committee to oversee their own behavior, under their own direction. I'm not impressed.

Also, "in the months since the announcement of the sale" (which would be December and January) "Zenith has agreed to implement a series of improvements to improve outcomes, strengthen career training, and ensure accountability and transparency." Yes, boys and girls, in just two months (with, presumably, time off for to celebrate Christmas and the big fat present Santa Duncan was delivering) Zenith managed to retool an entire college system that was previously designed to fraudulently use students as straws through which to suck up delicious loan money. Given an organization run by guys who have no actual college-running experience, that is a managerial feat of amazing skill and bullshittery.

Here's the big finish to the federal PR notice:

Throughout, the Department has sought a wind down of Corinthian Colleges that protects students, protects the investment taxpayers have made in their success, and creates opportunities for students to finish what they started. The Department has also sought a resolution that, where possible, establishes a strong and ongoing platform for high quality career education in the future. Today’s announcement by Zenith and Corinthian is a major and positive step in these directions.

And here's how I described this story the last time I covered it

Short version: feds threatened to shut down predatory loan-sucking for-profit scam schools, but decided to bail them out instead. Kind of like finding people in a burning building and saying, "You guys just stay there inside. We're going to hire someone to paint the place."


Once again, we see that zealous federal oversight is for public schools. For privately operated school-flavored businesses, the feds are there to make sure that nothing interrupts the sweet. sweet stream of money flowing to private pockets. It is always possible that Zenith will turn out to be awesome stewards of education, I suppose. But for students, it's a caveat emptor world. For businesses, don't worry-- the government will always watch your back. And don't forget-- this deal was only for a portion of the Corinthian chain-- the rest is still out there, still in business, still preying away. Caveat emptor, indeed.