The for-profit college industry’s implosion intensified, with two companies announcing mass campus closings days after a third filed for bankruptcy.
In a stunning fall from grace, the three companies, Career Education, Education Management and Corinthian Colleges, which once enrolled more than 300,000 students, have lost almost $8 billion in market value since their peaks over the last six years.
Career Education will shut or sell all of its career colleges to focus on its two universities, while Education Management will close 15 of its Art Institute campuses including the one in Fort Worth, the companies said May 6. Corinthian Colleges declared bankruptcy this week in the biggest college collapse in American history amid allegations that it falsified grades and job placement to attract students.
A federal regulatory crackdown is reining in for-profit colleges, which have been accused by state and federal authorities of preying on low-income students and saddling them with debt. The companies have denied wrongdoing and say they are providing education to many lower-income students shut out of traditional colleges.
“The collapse of Corinthian Colleges was the canary in the coal mine for the for-profit college industry,” Sen. Richard Durbin, D-Illinois, said in a statement. He called the upheaval “a long-overdue reckoning for an industry that profits off of students while sticking them with a worthless degree and insurmountable debt.”
Hard hit are the so-called career schools, which charge tens of thousands of dollars for certificates and associates’ degrees in areas like criminal justice, dental assisting, art and cooking, where jobs and wages are limited.
Under federal rules slated for this summer, to qualify for U.S. financial aid, schools will have to show they’re preparing students for gainful employment and that their graduates spend less than 8 percent of their income on loan payments. A for-profit college trade group is challenging the new rules in court.
Career Education and Education Management both said they’ll continue offering instruction for existing students to finish their programs while not accepting new enrollments, a process known as a “teach out.” By shutting down over time, the schools won’t have to cancel student loans, as many Corinthian College students are demanding.
As of last June, Education Management operated 51 Art Institute campuses in 25 states and Canada. They accounted for almost two-thirds of the company’s $2.27 billion in annual revenue. As of December, Career Education’s career colleges made up about a quarter of the company’s $741.4 million in revenue. The company is closing 14 Sanford-Brown campuses and its online school.
The Education Department is monitoring the shutdowns at both companies to ensure students’ interests are protected, according to Denise Horn, a department spokeswoman.
Career Education, based in Schaumburg, Illinois, will take a $40 million to $50 million restructuring charge. The company is trying to sell Briarcliffe College, Brooks Institute and Missouri College, it said in a statement.
The company has helped hundreds of thousands of students seeking a non-traditional career path “to obtain a quality education that allows them to achieve their goals,” Interim Chief Executive Officer Ron McCray told investors on a conference call.
Career Education will continue running Colorado Technical University and American InterContinental University. It is “is engaged in discussions” to sell cooking-school chain Le Cordon Bleu Colleges of Culinary Arts.
Career Education and Education Management both said they’re committed to assisting currently enrolled students in completing their programs.