Another Chapter In The Corinthian Saga

A decade ago, the Corinthian chain of colleges was the poster child for predatory for-profits, the shambling demonstration of everything that could be wrong with profiteering in the education world. They were also pretty good at gaming the refs and escaping consequences--even profiting from them. And now their heavily besmirchified name has surfaced again.

Corinthian was not so much in the college business as in the business of conning people into becoming conduits for carrying government money into Corinthian bank accounts. They were collecting mountains of grant and loan money and providing their students, who were hoping to educate their way into a better life, with no employment prospects, no useful education, but lots of debt. But the gravy train started to run into trouble. (I was following the story at the time; much of the following is cribbed from my own posts.)

In 2013, then-AG Kamala Harris took Corinthian to court. Here's a description of the suit's claims:

The complaint alleges that CCI intentionally targeted low-income, vulnerable Californians through deceptive and false advertisements and aggressive marketing campaigns that misrepresented job placement rates and school programs. CCI deployed these advertisements through persistent internet, telemarketing and television ad campaigns. The complaint further alleges that Corinthian executives knowingly misrepresented job placement rates to investors and accrediting agencies, which harmed students, investors and taxpayers.

This doubles as a description of Corinthian's business model. Recruiters were paid a bounty for each customer they signed up. They hired their own graduates to get their post-graduation employment numbers up. They were called "the nation's worst private college chain." And as word spread, the financial wheels that had attracted manny investors started to dome off.

In 2014, the Obama administration announced that they were by golly going to crack down on these predatory schools. That was in March. In June, the feds announced their plan to help prop Corinthian up and keep it open. Undersecretary Ted Mitchell (who came to the department carrying strong ties to Pearson, NewSchools Venture Fund, and other investor ties to the private education biz) announced that Corinthian would receive an influx of cash, permission to keep admitting students, and a government overseer to keep an eye on them (powered, I supposed, by the threat of-- I don't know. Stern looks? More cash?). It's possible that the feds were also concerned about the interests of investors, a list which included Wells Fargo, BlackRock, Royce, New York Mellon, and Morgan-Chase. And Corinthian, it later turned out, had plenty of friends in high places. This, apparently, was what Too Big To Fail looked like in the college world.

The whole "keep Corinthian open" thing was nuts. The feds position was that Corinthian was selling bogus snake-oil coated crystal treatment for serious maladies, but that students should be given the chance to complete the therapy.

By fall of 2014, the feds were helping to broker a deal in which Corinthian was to be bought up by a company. Specifically, a debt collection company, to Educational Credit Management Corporation, a group specializing in shaking down college students for their loan debts. They have been the subject of more than a few horror stories about overzealous collecting, but they did immediately (as in, December of 2014) set up a new subsidiary named Zenith Education Group to run the schools, and they turned out to be a bunch of pips as well. Putting a debt collection agency in charge of a college doesn't make a lot of sense, unless you understand that the purpose of the "college" is to recruit "students" to use as carriers for transporting loan dollars from lenders to the "college." The feds were pretty proud of themselves for having made sure that investments were secured and nobody had to actually suffer for their mismanagement of the for-profit business.

But by April of 2015, Corinthian was done, shot, outies, kaput. The feds fined them several million (finally) for being Very Naughty. They filed bankruptcy in May. Also by spring of 2015, many students had figured out that they had been had, bilked, cheated, and lied to. It may seem like they were a little slow, but remember-- for well over a year the feds had been saying two things:

1) If we find any lying cheating predatory schools, we will totally shut them down.
2) We think it's worth going the extra mile or ten to keep Corinthian schools open.

Operating under the premise that the federal government was reasonably trustworthy, would those two items not lead you to believe that you would be okay staying at Corinthian and continuing to borrow money to do so?

But no-- a whole bunch of students were left holding the bag, and by "bag" I mean "giant crapload of crushing debt for which they actually received nothing of value." Corinthian students had, in toto, acquired half a billion dollars worth of debt. So a whole bunch of those students decided that they would simply refuse to pay the debt.

That debt strike raised yet more kerfluffle. Here's what I said at the time:

On the one hand, I fully sympathize with folks who say, "When you borrow money, you pay it back. Doesn't get any simpler than that. If you borrow more money than you can pay back, that's just dumb. If you don't pay back your debts, somebody else pays the price. Other people should not pay for your dumb."

On the other hand, it's easy to make dumb choices people are lying to you.

Folks who find themselves in debt for Corinthian educations, but without any marketable skills that would allow them to make money-- those folks got in this mess by driving past a dozen corners where there should have been big bright neon red flags. But there were no flags there, because the gatekeepers had taken the flags down and stuffed them in their back pockets.

Also

Corinthian students have racked up over a half billion dollars in federal loans. The Consumer Financial Protection Bureau has already asked the courts to grant relief, and the Department of Justice has reportedly said that the Department of Education has "complete discretion" to make the loans evaporate. Back in February of 2015, a $480 million relief package was announced which would help (about 40%) with the private loans that students took out, but those are separate from the half billion in federal loans.

Then there was an election, and while the Obama administration had not been terribly helpful, Betsy DeVos was not having any of these shenanigans (I mean, student shenanigans--predatory for-profit shenanigans were totally okay). One of her many appearances before Congress to discuss her technique of dragging a Marianas-sized trench with her heels yielded this classic DeVos quote:

I understand that some of you here just want to have blanket forgiveness for anyone who raises their hand and files a claim, but that simply is not right.

As well as this observation:

Ms. DeVos maintained that it was “probably the case” that Corinthian Colleges deceived students, but she also said she believed that the “prior administration basically forced schools like Corinthian out of business” with onerous financial restrictions. She rebuffed questions about an investigation by career staff, unveiled in January 2017 memos published by NPR on Wednesday, that concluded that Corinthian students deserved full loan forgiveness because they received no educational benefit.

So for four years the Corinthian saga was largely stalled. Until this week, when, on June 1, the Department of Education said it was going to release $5.8 billion in debt, freeing 560,000 borrowers from that particular weight. Mind you, that doesn't get these folks back any of the wasted time, resources, and opportunity that they have lost over the last decade. 

The department press release leans hard on putting this in the context of Harris's previous actions against Corinthian, which is certainly a better look than the context of Biden's previous actions (doing nothing). But it's a nice next Chapter in a tale that has been both depressing and instructive about the effects of treating schools as investment properties and education as a profit-making commodity.