Washington, DC - The U.S. Department of Education announced its support today of an agreement between ECMC Group and Corinthian Colleges Inc. for ECMC Group’s newly formed nonprofit education entity, Zenith Education Group, to acquire 56 Everest and WyoTech campuses for transition to nonprofit status. While the transaction is now subject to the approval of Department officials, state authorizing agencies and accreditors, the transaction means that nearly 40,000 of Corinthian’s students can continue their education without fear that their school will suddenly close.
“Thousands of students can now rest assured that they will be able to pursue their education and have more stability in the midst of this school year,” said Under Secretary Ted Mitchell. “We are glad that Corinthian has reached an agreement with ECMC Group and believe that this transition will allow students to maintain progress toward achieving their educational and career goals and protect taxpayers’ investment, while Corinthian moves out of the business. We are pleased to help students transition from a problematic for-profit company to a nonprofit that is committed to giving students a new start and more opportunities for success.”
In June, the Department’s Office of Federal Student Aid placed Corinthian Colleges Inc. on an increased level of financial oversight after the company failed to address concerns about its practices, including falsifying job placement data used in marketing claims to prospective students and allegations of altered grades and attendance. As Corinthian announced in July, the company agreed to gradually wind down activity as part of an operating agreement with the Department. In addition, the enforcement actions against Corinthian, which have been brought by various state and federal agencies, including the Department, will continue.
As ECMC Group noted in its news release today, to further the Department’s and ECMC Group’s shared commitment to help students, once the transaction is finalized, ECMC Group will take additional steps to strengthen programs and protections for students, including:
- Affordability: ECMC Group will work to improve affordability by reducing tuition by 20 percent for new students in most Everest programs, effective immediately upon closing. Existing students who enroll in additional courses will also benefit from this reduction. The company further plans to award millions of dollars each year in institutional grants to fill gaps in funding so that students will not be forced to take out private loans.
- Accountability and Transparency: ECMC Group will ensure that two key measures of student success are met: strong program completion rates and job placement rates. ECMC Group intends to transform the culture of the campus system by bringing on a new senior executive team and through a new strategic focus on educational programming and the overall student value proposition. The company will also expand oversight by consolidating and centralizing all compliance, quality control and internal audit functions under ECMC Group’s purview. ECMC Group will also employ a monitor to oversee its regulatory obligations related to the acquired schools. Additionally, ECMC Group plans to provide students easy access to more information about their educational programs, relevant placement rates, and other measures of their likely success.
- Improved Job Placement: ECMC Group and campus leadership will coordinate with local and regional employers to ensure that skills being taught in the classroom reflect actual workforce needs and will lead to jobs in their field of study. ECMC Group will also lead a comprehensive review of all programs with a goal of improving and, if warranted, eliminating those that underperform. Students in specific underperforming programs will be given a choice of options, including a refund of loans that would be funded by ECMC Group.
- Individualized Support: ECMC Group will maintain smaller class sizes to re-emphasize quality learning over enrollment. Additionally, ECMC Group will improve academic counseling, tutoring, and remedial education services to ensure that more students have the tools and resources required for successful program completion; financial literacy counseling to help students better manage their student loans and reduce student loan debt; and career counseling services to provide clear paths to good jobs related to their fields of study.
The Department is receiving $12 million from the transaction negotiations and up to an additional $17.25 million earn-out over the next seven years, all of which will be used to support students. Corinthian will also retire all of institutional Genesis student loans, which it currently holds.
By stepping in to avoid a sudden shutdown and requiring Corinthian to sell and prepare to wind down its programs, the Department was able to ensure students have the opportunity to continue their education with minimal disruption and significant savings in taxpayer investments. Under the Higher Education Act, the Department is responsible for ensuring the effective administration and oversight of the approximately $150 billion in federal student aid that is disbursed each year.
While there are additional steps over the coming weeks before the transaction can be finalized, the Department will continue to work closely with the independent monitor, Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates, under the leadership of former U.S. Attorney Patrick Fitzgerald, to ensure Corinthian’s students have an orderly transition and can make informed decisions about their futures.
The full list of schools that ECMC Group intends to buy is here.
As part of the Obama Administration’s efforts to ensure that all students have the opportunity to pursue a quality education that leads to good outcomes, the Department has recently announced a federal interagency task force to help ensure proper oversight of for-profit institutions of higher education, which will be led by Under Secretary Mitchell.