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Computer Learning Centers Files for Bankruptcy

By  Anne Marie Borrego
January 29, 2001

Out of cash and faced with mounting debt, Computer Learning Centers filed Thursday for federal bankruptcy protection to liquidate its assets.

The troubled company also appealed the U.S. Department of Education’s order to repay $187.5-million in federal student aid for violating a Higher Education Act prohibition against paying commissions to admissions officers. Even if that appeal is successful, however, the company will still go out of business.

The chain of 25 computer training schools, based in Manassas, Va., closed its doors to students January 22, after its lender told it that the company’s checks were no longer good.

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Out of cash and faced with mounting debt, Computer Learning Centers filed Thursday for federal bankruptcy protection to liquidate its assets.

The troubled company also appealed the U.S. Department of Education’s order to repay $187.5-million in federal student aid for violating a Higher Education Act prohibition against paying commissions to admissions officers. Even if that appeal is successful, however, the company will still go out of business.

The chain of 25 computer training schools, based in Manassas, Va., closed its doors to students January 22, after its lender told it that the company’s checks were no longer good.

Computer Learning Centers’ latest round of troubles began on January 16, when the Education Department told the company that it could no longer participate in federal student-aid programs unless it could post a multimillion-dollar letter of credit. The company, which depends on federal aid for about 67 percent of its revenue, did not post the letter of credit. That meant that it had to wait to be reimbursed by the Education Department several weeks after eligible students enrolled. Previously, the school had received the money before classes began.

In its appeal to the Education Department, Computer Learning Centers maintained that its compensation practices were in compliance with the 1992 law’s ban on commissions. The company charged that the department had failed to provide consistent, public guidance on complying with the law. Instead, the company said, the Education Department issued a “stream of inconsistent private letters.”

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In a written statement, Computer Learning Centers’ president and chief executive officer, John L. Corse, chastised the department: “In directly causing the demise of CLC, the interruption of the education of over 9,000 students and the unemployment of 1,600 dedicated men and women, [the Education Department] has ignored the public interest in favor of a draconian approach to managing the student aid programs.”

The Education Department said in a press release that it was working closely with state licensing agencies to provide assistance to students. “The department’s first priority in this matter is to address the needs of students,” the statement said. Officials are working to arrange transfers for students to other schools. When that is not possible, the department adds that it will provide students with information about options for repaying their loans.

At least one state has stepped in on behalf of students. Earlier in the week, the state of Maryland said that students of Computer Learning Centers’ Laurel, Md., campus, could receive assistance from the state’s Higher Education Commission.

The Commission said it began to process a claim against a $2.4-million bond posted by Computer Learning Centers. The state said the funds will be used to reimburse students who are entitled to receive refunds under Maryland regulations. Maryland’s Higher Education Commission also said that it will help students, who received federal student aid for tuition at the Laurel campus, apply for forgiveness from the federal government.

Background articles from The Chronicle:

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  • Computer Learning Centers Suspends Classes (1/23/2001)
  • Education Dept. Tightens Financial Screws on Computer Learning Centers (1/17/2001)
  • U.S. Orders Computer Learning Centers to Return $187-Million in Federal Funds (12/18/2000)
We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication.
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