On Wednesday, a California Superior Court judge ruled that Corinthian Colleges misled students and engaged in illegal debt collection practices, ordering the now-defunct school to pay over $1.1 billion in restitution and civil penalties.
Perhaps you remember Corinthian Colleges. It was the country’s second largest chain of for-profit colleges, before it collapsed into bankruptcy last year amid evidence of phony marketing and predatory loans.
But the actual emails and testimony underlying the allegations haven’t been public. Until now.
Earlier this week, California’s Attorney General quietly filed thousands of pages of documents and testimony as part of an ongoing lawsuit against Corinthian. We trudged through them and, well, just read the upshots.
Corinthian recruited homeless students and then helped them get federal loans they couldn’t pay back.
Hollie Harsh testified that she and her fiancé Brian French were homeless and living in a tent on vacant land in Northern California when they toured one of Corinthian’s campuses. They told a recruiter they were homeless and unemployed. Despite that, the recruiter enrolled both of them that day, promising strong future job prospects. They took on thousands in federal loans that, given their circumstances, would be difficult to pay back.
The day before classes started, Harsh and French moved their tent to an empty lot across the street from campus. They were kicked off the lot by a deputy sheriff two weeks later, so they moved the tent to the school’s grounds instead, with the knowledge of the campus president. Harsh’s testimony describes tough times:
After a few quarters, Harsh realized that her Corinthian education would never lead to a job or help her start a business, so she dropped out of the program, owing more than $15,000 in debt.
Connie Reeder’s testimony describes similar recruiting tactics.
In 2010, Reeder worked as a counselor at a nonprofit organization that assists homeless and former foster kids. One of the former foster kids under her care, a 20-year-old single mother living in a transitional apartment, enrolled at a Corinthian school after the school told her that they would provide additional attention because of her learning disabilities. Like Harsh, she signed up for thousands in loans. A few days after the program started, she realized that she could not keep up with the pace of the courses and dropped out of the program with $6,000 in debt.
Her unpaid loans were sent to a collection agency, ruining her credit. And because of her tarnished credit, she could potentially become homeless, Reeder said:
Corinthian helpfully laid out the best kids to target. Top on the list: Those with “low-self esteem and few base hits.”
Corinthian advertised programs that didn’t exist
Corinthian repeatedly advertised programs that its schools did not offer, like “X-Ray Training School” and “Ultrasound Tech School”:
Only after getting some heat from the attorney general’s office did it stop advertising the non-existent programs online:
It pushed students to borrow from a bank that Corinthian had undisclosed financial ties to.
According to the attorney general’s suit, Corinthian did not disclose to students its direct relationship with a lending program that the Corinthian had a backroom deal with. The school’s loan documents stated, “We do not promote or endorse this lender”:
It used aggressive debt collection tactics to push students to pay
Corinthian employees went to great lengths to collect on the private loans, even encouraging employees to pull students out of class or bar them from entering in order to collect on unpaid debts:
It lied about job placements to students, investors and the government
Under federal regulations, for-profit schools are required to report the job placement rates of their graduates to make sure that students are not being misled. Corinthian routinely said their graduates had higher job placement rates than they did and, according to the suit, a third-party auditor could verify only half of the job placements that Corinthian reported. The school’s campuses struggled to place students after graduation to the point that some campuses relied on temp agencies and self-employment to secure higher placement rates, despite the awareness that doing so could attract greater scrutiny:
Corinthian’s executives were very aware of the issues with job placement. A PowerPoint presentation forwarded to school executives by the company’s CEO explicitly references the compliance troubles:
Even with this knowledge, the company reported strong numbers to federal officials:
It misrepresented the transferability of credits
The school advertised on its website that many of the credits were transferable to other programs in the state of California. Except it wasn’t true. Many students were unable to transfer credits to other colleges.
Corinthian’s next court date is set for March 22, when a judge may issue a default judgment against the school and order it to pay civil penalties and compensation to the students. It’s unclear at this point if the students will receive any compensation, however.
Evan Borges, a former counselor to the college chain told ProPublica that “Corinthian, as we know it, is gone, effective as of the date of the bankruptcy.”