The For-Profit College That’s Too Big to Fail

Career College Central Summary:

  • Usually, when a school closes, the Education Department tries to find other programs to accept the students and the credits they’ve earned.
  • But the size of Corinthian’s student body means it’s hard if not impossible to find enough places at other for-profit or community colleges.
  • That creates a problem for the government, which must forgive loans for students who don’t transfer to other institutions.
  • In the case of a school as large as Corinthian, that provision could cost taxpayers millions of dollars.
  • Now the Education Department is actively trying to shore up Corinthian’s schools even as it shuts the company down.
  • “They thought they were going to be sending a really strong message” by cracking down on Corinthian, says Trace Urdan, an analyst at Wells Fargo Securities (WFC).
  • “They didn’t really understand that it may collapse.”
  • Corinthian hired Barclays (BCS) to help find new owners.
  • That won’t be easy: Revenues have fallen across the for-profit college industry as federal scrutiny has increased and unemployment has declined.
  • The government’s “unprecedented” action against Corinthian doesn’t help draw private money to the industry, says Wells Fargo’s Urdan.
  • Potential investors and operators worry that other for-profit schools may be shuttered.
  • “There is a contingent that says there is a secret list in the basement of the Department of Education, and they will be knocking these guys down one after another,” Urdan says.

Click through to read the full article.

BLOOMBERG BUSINESSWEEK

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