WALL STREET JOURNAL: Regulation for Profit
Career College Central Summary:
After destroying for-profit Corinthian Colleges, the Department of Education is now brokering the sale of its schools to a government contractor that guarantees and collects federal student debt. Maybe DOE’s mission statement should be education of the government, by the government, for the government.
The Obama Administration’s for-profit scourges drove the Santa Ana-based Corinthian out of business this summer by choking off federal student aid for alleged regulatory violations. DOE’s actions precipitated a liquidity crisis that threatened to bankrupt Corinthian and throw 72,000 students out of school. So at the government’s gunpoint, Corinthian signed a living will to sell 85 schools and close 12 others.
Corinthian has now disclosed that Zenith Education Group, a spinoff of the nonprofit Educational Credit Management Corporation Group (ECMC), has agreed to buy 56 campuses for a mere $24 million. Corinthian grossed $1.6 billion in revenue and took in about $1.4 billion in federal student aid last year. So for a modest down payment, the nonprofit has scored access to a font of federal cash.
In return for rubber-stamping the acquisition, DOE is taking a 50% cut. Corinthian’s $12 million remainder will go mainly toward refunding student debt, covering existing liabilities and paying litigation costs. DOE and other federal agencies haven’t relinquished their legal claims against Corinthian, but they have agreed not to sue the new nonprofit owner in return for a $17.25 million payment, which is on top of the $12 million. For-profit government isn’t an oxymoron.
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WALL STREET JOURNAL