The Consumer Financial Protection Bureau on Tuesday filed suit against Corinthian Colleges, alleging
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The Consumer Financial Protection Bureau on Tuesday filed suit against Corinthian Colleges, alleging that the for-profit higher-education provider, which is in the process of selling or closing all of its campuses, engaged in deceptive lending and recruiting practices in recent years, in violation of federal law.
Many of the lawsuit’s allegations are astounding. Here are five:
1. To bolster its job-placement statistics, employees at one of the company’s Everest College locations created fake employers, matched students with them, and had their friends verify the employment. The lawsuit claims that juking job-placement numbers was not uncommon on Corinthian campuses because the company had to stay eligible for federal financial aid—its largest source of revenue—by meeting accreditors’ minimum job-placement standards.
2. Corinthian sought to prove that its graduates had been arrested. According to the suit, connecting graduates with arrest records that matched their names allowed the company to inflate job-placement success rate by classifying some students—who may or may not have actually been arrested—as “unavailable for employment.”
3. An Everest Institute campus paid employers $2,000 to employ graduates for at least 30 days. According to the lawsuit, Corinthian graduates needed to be employed for only one day, and to return to work on the second, in order to be counted by the company as having found a “career.” Corinthian officials considered expanding this “pay to place” program to Florida, but one executive worried about news-media attention, saying that “the potential for negative press in Florida is much higher than it is in Atlanta.”
4. Corinthian distributed Craigslist job postings as part of its career services. While the company bragged about its “career-focused education,” the lawsuit states, its career services were slim to nonexistent. Graduates who had been “placed” in jobs—for as little as those two days—got no further help from the company.
5. Corinthian harassed students who were past due on their third-party-loan payments. In order to satisfy the rule that prohibits colleges from receiving more than 90 percent of their revenue from federal financial aid, the company jacked up tuition to create the need for a loans from a private lender, the lawsuit states. Corinthian then agreed to buy the loans that were more than 90 days past due. The company would then exert significant pressure on late-paying students. For example, it was Heald College policy to shut off computer access to students who were more than 30 days delinquent. One financial-aid staff member at an Everest College campus pulled delinquent students out of class so often that she was dubbed the “Grim Reaper.”
