Corinthian Colleges meets its downfall

by Walter Olson on July 27, 2014

Through the actions of multiple federal agencies — the Department of Education, Securities and Exchange Commission, and Consumer Financial Protection Bureau — the Obama Administration has succeeded in wiping out a major for-profit education provider with thousands of employees and 72,000 students, all without bringing a legal charge. Imagine what they could have done if they’d filed charges [WSJ editorial]

{ 8 comments }

1 Isaac 07.27.14 at 5:24 pm

I agree that it’s not a good thing that such coercion by the regulatory state (without filing charges) is possible, but this company was repeatedly engaged in multiple forms of fraud, such as lying about job placement statistics. I have no problem in principle with for-profit education, but this company could not exist without the federal student loan program’s ridiculous largesse, so this is not an issue about free markets.

2 Jack 07.29.14 at 10:58 am

Well, it’s nice to start the day with a feel-good positive news story. Good riddance to these educational parasites.

3 DEM 07.29.14 at 11:18 am

Isaac should we expect the administration to come down equally hard on not-for-profit schools that take a few liberties with their job placement statistics?

4 No Name Guy 07.29.14 at 11:57 am

Piling on a bit, but I’ll extend DEM’s comment by editing Isaac’s comment:
I have no problem in principle with non-profit education, but most state and Ivy League schools could not exist without the federal student loan program’s ridiculous largesse, so this is not an issue about free markets.

5 Isaac 07.29.14 at 5:15 pm

To DEM and No Name Guy:

I agree with the sentiments behind your comments. The federal student loan program’s largesse is the real enemy here. All I claim is that 1. It is still a good thing that this abuser of the program is shut down and 2. That while there are plenty of worthless degrees given by nonprofit universities, and that subsidization of such degrees is a problem, that Corinthian Colleges is particularly poor at giving tax payers a good value for their money.

6 No Name Guy 07.30.14 at 1:11 pm

“Corinthian Colleges is particularly poor at giving tax payers a good value for their money.”

I don’t disagree at all. The same holds for many non-profit universities as well.

It’s like the gal at NYU:
http://www.nytimes.com/2010/05/29/your-money/student-loans/29money.html?_r=2&http://&
“So why didn’t N.Y.U. tell Ms. Munna that she simply did not belong there once she’d passed, say, $60,000 in total debt? ”

“That’s not a role that the university wants to take on, though. “I think that would be completely inappropriate,” said Randall Deike, the vice president of enrollment management for N.Y.U., who oversees admissions and financial aid. “Some families will do whatever it takes for their son or daughter to be not just at N.Y.U., but any first-choice college. I’m not sure that’s always the best decision, but it’s one that they really have to make themselves.” ”

“She recently received a raise and now makes $22 an hour working for a photographer. It’s the highest salary she’s earned since graduating with an interdisciplinary degree in religious and women’s studies. ”

In other words, NYU (and all the other public / non-profit universities out there) don’t want to cut off the Fed Student Loan funded gravy train that is paying for their fat salaries and cushy positions. They don’t give two shakes of **** for the people they’re saddling with debt for worthless, luxury product degrees. Yes, in fact, many if not a majority of university degrees are in fact luxury products, which are those that I’d define are ones that have poor economic payoff. This poor lady with a useless “interdisciplinary degree in religious and women’s studies”, all the English Lit majors out there (sorry English Lit majors – it’s a nice degree, just with no utility compared to the cost), poetry BA’s, theater, art, social work, MFA’s, etc, etc, etc. She’d be in about the same places as if she’d taken 4 years off, read a few books and put a 100k on credit cards buying fancy clothing.

In stark contrast to these “luxury” little value degrees, there are those that have clear economic payoff – engineering, the hard sciences (chem, physics, etc), medicine / nursing, etc. However, even with these, a student must be a wise purchaser of this good – 2 years at a community college (Seattle Central CC is 3.9k / year in-state) then a transfer to Washington State University (11.4k / yr in-state, 24k out of state) for a Mechanical Engineering degree is a far better value than doing 4 years at Seattle Pacific University (35k / year for 14-15), for example. The CC / WSU route gets you there for about 31k, while the SPU route costs about 140k (note, neither include “living” which must be done anyways, going to school or not). An ME degree is an ME degree at a certain large producer of airplanes in Seattle, for example and will earn you enough in your first full time year to pay for the entire cost of the CC / WSU route, and have many thousands left over.

So, why isn’t NYU being shut down like Corinthian? Why isn’t SPU? Or at least, why aren’t these and other similar universities being made ineligible for federally backed student loans, especially for their “luxury” degrees?

7 Hugo S. Cunningham 07.30.14 at 11:34 pm

I share the skepticism of other commenters. Corinthian’s model is wrong for students and taxpayers. We are not talking about “education”– broad college degrees that are valuable for a wide variety of jobs and life experience– but rather “training”– narrow technical skills that are useful only for a narrow spectrum of jobs and go stale rapidly. If the graduates don’t get hired quickly for such jobs (and most don’t), they have run up debt for no purpose. A better model would be for an employer to pick a particular employee and send him in for training they know he will use. The government can reimburse the employer if the employee does not stay long enough to amortize the training investment.

8 Boblipton 07.31.14 at 6:59 am

“…graduating with an interdisciplinary degree in religious and women’s studies.”

I don’t understand how some one could graduate with a degree in those subjects and not be snapped up by a major corporation for millions of dollars. It’s so clearly aimed at a Big Bucks career in a hot, growing industry that its failure is clear prima facie evidence that the failure is the university’s.

Bob

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