REPUBLIC REPORT: ECMC CEO Explains Deal To Buy Troubled Corinthian Campuses

Career College Central Summary:

  • I’ve written in the past about the conversions to non-profit status of two other troubled for-profit college companies, Keiser and Stevens-Henager — motivated, it seemed, by a desire to escape the stigma of a discredited industry and to avoid government regulations aimed at abuses in the for-profit sector. In those cases, insiders from the for-profit company remained in a position to profit generously from the new non-profit, and there were real concerns about abuses of the non-profit status, concerns entirely borne out by review of the IRS 990 forms filed by the successors to both Keiser and Stevens-Henager.
  • More recently, publicly-traded for-profit college giant Grand Canyon announced it was working to become a non-profit, in order to avoid the for-profit stigma.
  • The ECMC deal is different, since the schools will be under new management. But it raises its own set of concerns, which CEO Hawn, a long-time student loan executive, was keen to address with me.
  • ECMC has no experience operating a higher education institution. Its higher education experience is in the field of collecting unpaid student loans, and a report this year in the New York Times described ECMC’s approach to student debt collection as “ruthless.” As the Times reported, a panel of bankruptcy appeal judges in 2012 said that the agency’s collection activities  — trying to collect on a debt that had, in fact, already been paid in full — “constituted an abuse of the bankruptcy process and defiance of the court’s authority.”  The article quoted Emory Law Professor and bankruptcy expert Rafael Pardo as saying, “we should be outraged when a student-loan creditor like ECMC can use bulldog tactics to scare away someone who has a legitimate claim for relief.” A separate report by Bloomberg noted that per-debt collection commissions helped one ECMC collector make $454,000 in one year, while the then-CEO got $1.1 million and a generous benefits package.
  • When I asked about the allegations of abusive practices, Hawn said, “We are a highly compliant organization. We follow the rules, and I’m proud of the work that we do.” As to the company’s role in squeezing cash out of broke student debtors on behalf of the U.S. Department of Education, Hawn said “Our role is not to determine social policy.”
  • When I asked Hawn about ECMC’s lack of experience in running a college, the first thing he cited was the corporation’s work in education-related call center management and default prevention.  Those types of activities represent some of the shadiest components of the for-profit college world, as well as a controversial aspect of ECMC’s work, so it was a relief that Hawn otherwise talked a good game about his motivation for this transaction.
  • “What we want to do,” Hawn says, “is help students…. We will not rest” until the campuses have quality programs.  Hawn said ECMC knows “we have a lot of work to do.” But he said that “under the radar” the company has been “assembling a short list of qualified individuals” for management and that he was “optimistic about the caliber” of people he can hire.

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