Preventing Another Corinthian

Career College Central Summary:

  • Both critics of for-profits and industry leaders say the department can fail to grasp how publicly traded for-profit chains work. For one thing, observers said the department has not hired any former for-profit administrators to give them an inside perspective.
  • [Robert] Shireman said this week that the department doesn’t necessarily need access to better information about for-profit colleges as much as it needs to fundamentally change its approach. “Wall Street itself has a hard time understanding what’s happening inside large publicly traded companies," he said in an interview. "So you can get information, but really knowing what it means is extremely complicated and often involves making judgments.”
  • Shireman said that in his experience the department, fearing lawsuits and political pressure, relied too heavily on “bright line” indicators that a college was struggling before it took action — such as failing a financial metric, surpassing a cap on how much revenue a company may derive from federal aid, or, as in Corinthian’s case, missing a deadline for turning over requested documents.
  • To try to get a better handle on big for-profits, the department in 2011 created the Publicly Traded and Large Schools Workgroup.
  • Yet a February audit by the department’s Office of Inspector General found that the “workgroup has not met regularly since its inception nearly three years ago.” The department was still trying to create a scoring system based on financial data from corporate filings.
  • The aftermath of Corinthian and other possible failures by major for-profits could include Congressional hearings and lawsuits. As a result, experts said, the department will want to appear proactive rather than reactive in overseeing orderly closures.

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