By Charlene Crowell
NNPA Columnist
Thousands of students who are now or formerly enrolled at one of 52 Corinthian Colleges across the country will soon feel $480 million of financial relief on their private student loans.
An agreement between the Consumer Financial Protection Bureau (CFPB) and Zenith Education, a subsidiary of Educational Credit Management Corporation (ECMC) and long-time federal loan guarantor, secured the relief. Announced February 3, the agreement also involves other federal regulators and paved the way for ECMC to acquire most of the troubled for-profit campuses formerly a part of Corinthian Colleges’ nationwide network.
Former and current Corinthian students enrolled at one of its 52 Everest and WyoTech campuses located in 17 states will be affected. The states are: Colorado, Florida, Georgia, Illinois, Michigan, Missouri, New Jersey, Nevada, Ohio, Oregon, Pennsylvania, Texas, Virginia, Washington and Wyoming. Many of these campuses are clustered in highly-populated suburban areas including Atlanta, Chicago, Denver, Tampa and Detroit; as well as inner-city locations in Dallas-Fort Worth, Houston, Jacksonville, Pittsburgh and Seattle.
ECMC created its new Zenith Education Group as a nonprofit provider of career school training. Technically, the nonprofit status removes Zenith and its operations from federal regulations of for-profit colleges.
For the Department of Education, Zenith’s nonprofit status removes it in large part from mandatory compliance with two key rules known as gainful employment and 90/10. The gainful employment rule, announced last year, was intended to eliminate programs that create too much debt and not enough benefits for students. The 90/10 rule limits the amount of money for-profit colleges can receive in federal aid. The change to nonprofit status will also most likely remove enforcement jurisdiction by the Federal Trade Commission.
One consumer advantage resulting from the nonprofit status will be that Zenith will not be able to force students into mandatory arbitration clauses, long-considered to be a built-in advantage for businesses.
In its news release, Zenith acknowledged its freedom from mandatory compliance but also announced its intent to “voluntarily adhere to DOE’s gainful employment rules for all of its programs.”
In addition to forgiving $480 million in private loans, the CFPB agreement requires Zenith to cooperate with an independent compliance monitor. The inclusion of an independent monitor is to another and similar role that resulted from the multi-state negotiated mortgage settlement. The yet-to-be appointed monitor will focus on Zenith’s transparency and compliance with all applicable laws, regulations and accreditation standards.
Approximately 40 percent of the former Corinthian students affected by the transaction will also be afforded several options in continuing their education. These options, known as the “Student Choice Program” include: full refunds of tuition and fees paid to Corinthian for those who choose not to continue enrollment; transfer vouchers for student remaining but selecting another course of study; or remaining in their previous chosen study area.
How well this program works for students will largely be determined by how well students understand their options. The responsibility for articulating the options rests fully with Zenith.
Although new students enrolling after February 2 at one of the Everest campuses will receive a 20 percent cut in tuition costs, the move does not acknowledge that Corinthian had already increased its tuition by as much as 14 percent. The increase had the effect of pushing students into its costly private student loan program.
Some may view these developments as providing some degree of relief for students. In reality, however, much more remains to be resolved.
The September 2014 lawsuit filed by CFPB identified Corinthian’s private label student loans to be a major problem. Further, the suit alleged that Corinthian used bogus advertising targeted to low-income students who were often the first generation of their family to attend college. These false claims pushed students into the costly private label loans and exploited their limited exposure to the world of higher education.
The advertised promises of job prospects and careers never happened. Further, Corinthian’s tuition costs were so high that an associate degree came with a price tag ranging from $33,000 to $43,000. The costs for a bachelor’s degree ran higher from $60,000 to $75,000.
While some students have been assisted, the recent agreement does not offer any protections or compensations for students enrolled at Corinthian’s campuses that were not a part of the ECMC-Zenith acquisition. Lastly, the settlement does not alter any federal student loans that students at any Corinthian campus may have incurred.
As a result, CFPB announced that the lawsuit against Corinthian remains ongoing. A second and separate lawsuit by the State of California against Corinthian may yet provide some financial relief for students enrolled at a Corinthian campus in that state.
For Maura Dundon, a senior policy analyst with CRL, the sale leaves probing concerns for many stakeholders.
“The sale triggered intense concern among student, education, consumer and civil rights groups, who feared that the transition from a for-profit college to a non-profit college provided few protections to students, while allowing the school to escape regulatory scrutiny”, observed Dundon.
“[E]CMC will still target the same lower-income students with expensive career education programs of uncertain value on the job market”, explained Dundon. “ECMC students may end up stuck in the same situation as Corinthian students: high debt and high defaults, and not enough graduates with jobs paying enough to justify the loans.”
