For-Profit-College Chain Sued

Corinthian Colleges’ website claims it’s one of the largest for-profit secondary education companies with more than 83,000 students. That’s pretty impressive.

But the Consumer Financial Protection Bureau (CFPB) alleges the for-profit chain Corinthian Colleges Inc. uses predatory lending tactics and sued the chain.

The CFPB claims, “Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.”

In a complaint, the CFPB asked for repayment from Corinthian Colleges for past and present students who, collectively, took out more than $500 million in private student loans.

CFPB Director Richard Corday said, “For too many students, Corinthian has turned the American dream of higher education into an ongoing nightmare of debt and despair. We believe Corinthian lured consumers into predatory loans by lying about their future job prospects, and then used illegal debt collection tactics to strong-arm students at school.”

Corinthian Colleges operates 100 school campuses across the country. The company operates the schools under the names Everest, Heald, and WyoTech.

In June, the U.S. Department of Education delayed Corinthian’s access to federal student aid dollars because of reports of wrong-doing.

The CFPB cites internal Corinthian documents that show most students lived in households with very low incomes and are often the first people in their families to attempt to get a college education.

Tuition and fees for some Corinthian programs were more than five times the cost of similar programs at public colleges. In 2013, the Corinthian tuition and fees for an associate’s degree was $33,000 to $43,000. The tuition and fees for a bachelor’s degree at Corinthian cost $60,000 to $75,000.

But the degrees did not lead to promised jobs. The CFPB alleges:

  • Corinthian inflated the job placement rates.
  • Created fictitious employers and reported students as being placed at those fake employers.
  •  Corinthian schools inflated advertised job placement rates by paying employers to temporarily hire graduates. The schools did not tell students about the payments or that the jobs were temporary.

PREDATORY LENDING

The CFPB claims Corinthian used strong-arm tactics to shame students and collect debts. CFPB says Corinthian:

  • Shamed students by pulling them out of class.
  • Blocked access to school computers.
  • Preventing them from enrolling in classes.
  • Withheld diplomas.

The CFP asked a federal judge in the Northern District of Illinois to force the company to stop its alleged illegal practices and provide compensation for the tens of thousands of students who took out Genesis loans. The CFPB estimates that from July 2011 through March 2014, students took out approximately 130,000 private student loans to pay tuition and fees at Everest, Heald, or WyoTech colleges. Some of these loans have been paid back in part or in full; the total outstanding balance of these loans is in excess of $569 million.

Consumer advocates applauded the CFPB action. Robyn Smith of the  National Consumer Law Center said, “The Department of Education should create an amnesty program providing full federal loan discharges for all Corinthian students, even those who are not currently attending Corinthian.” 

 

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Barbara Nevins Taylor

As the winner of 22 Emmy Awards and a slew of journalism honors and awards, I created ConsumerMojo.com to give you the straight story about complicated stuff. Tell us what you want to know and we'll get you the answers.