Tiffany Johnson, a mother of two, was a first time college student at one of Corinthian Colleges’ campuses in Hayward, California. By the day Corinthian announced it was closing, Tiffany had taken out nearly every kind of financial aid available to her to fund her schooling, including Cal Grants, Pell Grants, federal financial aid, and private student loans, and her total debt was over $36,800. Tiffany had no idea what her options were when she learned of the abrupt shutdown. With no hope for relief, she felt trapped under the mountain of debt. Tiffany found help at a local legal aid clinic, although the process to apply for a loan discharge was complicated and lengthy. Many other students were not so lucky.On Sunday April 26, 2015 nearly 16,000 Corinthian students like Tiffany learned through an email that there would be no class on Monday, or any day after that. The students were instructed to report to their Heald, WyoTech, and Everest campuses to pick up their records, and were given almost no other information. Devastated, many students were left with tens of thousands of dollars in debt, and little or nothing to show for it. However, it was not only the students who were caught off guard by the Corinthian closure; both the Federal and California governments seemed to be completely unprepared to deal with what was the largest school shutdown in the history of higher education in the United States.
How could this happen? First, a little background.
For-profit institutions like Corinthian (and its better-known cousins the University of Phoenix and ITT Tech), are private colleges run by businesses. These institutions are run by companies that operate under the demands of investors and stockholders, and exist primarily to earn money for their investors. Under Federal law, for-profit institutions can receive up to 90 percent of their revenue from Federal student aid, and many for-profit institutions have taken advantage of a loophole in the law to receive the additional 10 percent from veterans’ GI Bill money. In fact, the University of Phoenix is the largest recipient of taxpayer money under the GI Bill in the nation.
Investigations by the federal government, the media, and States’ Attorneys General have revealed countless instances of unscrupulous for-profit institutions, which engage in deceptive, aggressive, and manipulative tactics to enroll as many students as possible – without regard for their potential for success or ability to afford tuition – in an effort to maximize profits. Corinthian, for example, was the subject of a lawsuit brought by California Attorney General Kamala Harris, and was fined $30 million by the Department of Education over the use of misstated and inaccurate job placement rates to recruit students.
So what is being done to help students?
In the two months since Corinthian’s closure, the Federal government has instituted a “closed school student loan discharge program,” which will relieve students at the closed Corinthian schools of their federal financial aid debt. The Department of Education has appointed a Special Master to help develop a broader system to aid students at other institutions who are seeking debt relief of their Federal Direct Loans because they believe they were defrauded, and to make recommendations related to borrower defense claims received by the Department. In California, the most significant effort to help the affected Corinthian students has been AB 573, legislation authored by Assembly member Jose Medina, which seeks to ensure that students affected by the closure have access to economic relief and educational opportunity.
AB 573 would assist the students harmed by the Corinthian closure by:
- Waiving community college fees for students enrolled at a Corinthian school when it was closed, and providing funding for community college counselors to assist students in transferring to and enrolling in programs.
- Providing legal assistance to help students, including specialized legal assistance for veterans, with the loan forgiveness process.
- Restoring the year(s) of Cal Grant eligibility for Heald students.
- Establishing a single point of contact, working in cooperation with the Attorney General’s Office, the Bureau for Private Postsecondary Education, and the Student Aid Commission to ensure that students are provided with accurate and consistent information from the agencies involved in the school closure process.
AB 573 is especially important given the number of other massive for-profit institutions seemingly poised to collapse. ITT Educational Services, theUniversity of Phoenix, and Education Management Corporation (EDMC) are facing declining enrollments and increased government scrutiny, and it is widely rumored that both are on the brink of bankruptcy and possible closure in the near future. That means there are potentially tens of thousands more students like Tiffany out there, carrying significant student debt, and unsure of what the future might hold.
Luckily for Tiffany, she has been able to receive some guidance from a Bay Area legal aid group, and she’s planning on applying for a loan discharge and going back to school. But her private loans and the state and federal grants she was awarded are not included in the discharge program, and because she was a Heald student she is currently ineligible for relief from the Student Tuition Recovery Fund. Students like Tiffany, and the thousands of others facing similar problems, enrolled in school so that they could better their lives. Now they find themselves in a quagmire of debt and broken dreams. AB 573 will be a step in the right direction in improving for-profit education in California, but there’s still a lot of work to be done to ensure that every student in California is getting a quality education.
Postscript: If you attended a for-profit institution and are looking for resources, start with the Attorney General’s page for Corinthian students or the Department of Education’s referral tools at NextStepsEdu.org. If you’d like to share your story and join the effort to advocate on behalf of for-profit students, you can reach me at aperry@publicadvocates.org. Together we can improve for-profit education in California, for good.
