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A business built on student aid

Schools for profit: Corinthian's greedy saga

Federal regulators have moved to shut down Everest’s parent company.

Los Angeles Times

Federal regulators have moved to shut down Everest’s parent company.

After wrapping up a nine-month electrician training program at Everest College-San Bernardino in 2011, Kenneth Dewar hoped to get the career placement assistance he had been promised.

Then he spotted his own photo on a campus wall featuring "successfully placed" graduates. The school had counted his sporadic gigs as a freelance audio engineer, work he secured before ever enrolling.

"I was a mark in their book, and they didn't want to change it," said Dewar, 39, whose attempts to get placement assistance went nowhere.

As federal regulators move to shut down Everest's parent company, Corinthian Colleges, corporate documents and interviews with company insiders provide a behind-the-scenes portrait of how Corinthian persuaded hundreds of thousands of low-income students to fork over as much as $40,000 for vocational degrees.

Interviews with staffers and students, along with government lawsuits and company regulatory filings, reveal a systematic effort to manipulate data used to recruit students and retain eligibility for federal student aid — the lifeblood of the company's profits.

Federal and state investigators have long viewed Corinthian, based in California, as one of the most problematic players in the troubled for-profit college industry. The student loan pipeline fueled the company's rapid enrollment growth, peaking at more than 110,000 students in 2010. (In Tampa, Corinthinan operates Everest University, which has branches in Brandon, Largo and Lakeland.) Corinthian charges students up to 10 times the cost of a comparable community college education. That requires many of them to take on more debt than they can repay — leaving taxpayers on the hook for mass defaults.

"It just made you feel dirty after a while," said Tyrone Gaines, who worked in corporate marketing and training at Corinthian's Santa Ana headquarters for three years ended last July. "They don't make money; they take money from the taxpayers. That's their whole business model."

Corinthian spokesman Kent Jenkins declined to make company executives available for interviews. In a statement, he said there is "clear evidence that students at Corinthian Colleges are well served by their education." Jenkins cited a 61 percent overall graduation rate and a 69 percent job placement rate. Allegations of manipulating job placement rates are "without merit," the company said.

• • •

Nearly 37 percent of students who left Corinthian's schools in 2008 defaulted on their loans within three years, according to a Los Angeles Times analysis of federal student loan default data.

The reliance on federal money became a choke point last month, when the U.S. Department of Education suspended the company's access to student aid, pushing Corinthian into a cash crunch. In a regulatory settlement, the company agreed to sell 85 of its 107 campuses and online programs, and close 12 others. Only a fraction of Corinthian's student body, now down to 72,000, will be eligible for automatic tuition refunds.

Corinthian typically charges $17,000 to $19,000 for a nine-month vocational certificate program, according to government filings. It charges an average of $40,000 for a two-year associate's degree.

Boosting job placement figures was part of a larger pattern of Corinthian's massaging data on student success, including graduation rates and loan defaults, according to former employees and company records cited in government lawsuits.

Chris Rubacha taught criminal justice classes at Everest's City of Industry campus from 2009 to 2011. He said he felt pressure from superiors to pass poor-performing students so the school could keep collecting tuition and boost graduation rates.

In one instance, he tried to fail a student who rarely showed up for class or completed assignments. Administrators changed the woman's grades to pass her, he said. "It's all smoke and mirrors," Rubacha said. "They were just chasing the numbers."

Corinthian relied on carefully scripted marketing to sell students on the dream of improving their lives through education. A sales force of nearly 2,000 admissions advisors was evaluated daily on the percentage of inquiries converted into enrollments.

Internal presentations instructed admissions workers to overcome "common objections" of students, especially concerns about tuition cost or whether credits would transfer to four-year universities — which don't, in most cases. Employees were instructed to dodge questions. "You can easily kill the obstacle without giving away too much information," read one presentation.

A similar data-driven culture applied to job placement. Gaines, the former marketing employee, recalled that the company considered students at temp agencies to be "employed," an allegation also referenced in a pending lawsuit filed last fall by California Atty. Gen. Kamala Harris. The suit also noted problems with "self-employment placements."

A similar attorney general's suit in 2007 cited evidence of students placed at "fake businesses" invented in class assignments. Corinthian settled that case for $6.5 million.

Toya Smith, who worked in career services and admissions at an Everest College in Houston, said she was instructed to seek out employers with high turnover rates because of bad management or low pay. That allowed Everest to connect many students with the same company in a short period of time, she said, driving up placement rates — a key metric for federal student aid eligibility.

"It's not a department set up to help the graduates actually seek out a career," Smith said. "It was just a way to sell the dream."

• • •

Heidi Vella, 50, has struggled to keep up with the more than $13,000 in federal and private loans she took out for a nine-month surgical assistant program at Everest's campus in Reseda. Graduating in 2010, she searched for nearly two years before finding a temporary job in her field.

She now hands out food samples at a Santa Clarita Sam's Club for $11 an hour.

"If I ever thought that my life would be where it is now, I never would have gone to Everest," she said. "It's made my life worse."

Schools for profit: Corinthian's greedy saga 07/21/14 [Last modified: Monday, July 21, 2014 4:40pm]

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