The Department of Education will fine Corinthian Colleges $29.6 million for lying to students at its Heald College chain, citing almost 1,000 examples of defrauding students about job placement rates. The government will also cut off federal financial aid, the lifeblood of most for-profit colleges, to all Heald schools, and forbid them from enrolling new students.
The action will likely deal a crushing blow to Heald, which has been fighting for its life in the face of a forced shutdown of Corinthian by the Education Department. The school launched a campaign to find a buyer for its campuses late last week, just days before the government hit the school with its findings.
The department's fine might also mean bankruptcy for Corinthian, which has far less than $30 million in its coffers. Delisted from the stock exchange, where it had been trading at less than 5 cents a share, the company has even resorted to selling off automotive equipment to keep open its doors.
Heald, which has campuses in California, Oregon, and Hawaii, is attempting to find a buyer for its 13 schools, nearly a year after the Education Department said it was forcing Corinthian to sell off all of its schools in the face of a litany of investigations and lawsuits. While a nonprofit bought most of the campuses of Everest, Corinthian's largest chain, a buyer has yet to be found for Heald.
In a letter to Corinthian's CEO, Jack Massimino, the Education Department laid out a raft of violations relating to Corinthian's promises to students and lies to the school's accreditor. The school falsified its job placement rates, the department said, in one example by counting an accounting student's prior job at Taco Bell as a successful job placement.
The department's action against Heald could also be a boon to students seeking debt relief on the tens of thousands of dollars they incurred in loans at Corinthian schools. In its press release, the government — which had previously stayed silent on debt relief for students — said it was "working on a process to help federal student loan borrowers submit a defense to repayment of their federal student loans."
A Corinthian spokesman, Joe Hixson, said the Education Department's fines were a violation of due process, and that the government's allegations were "highly questionable," threatening Heald's future by damaging its prospects of finding a buyer.
"These unfounded, punitive actions do nothing to advance quality education in California, but would certainly shatter the dreams and aspirations of Heald students and the careers of its employees," he said.
Molly Hensley-Clancy is a business reporter for BuzzFeed News and is based in Washington, DC. She covers the intersection of business and education.
Contact Molly Hensley-Clancy at firstname.lastname@example.org.
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