Dive Brief:
- Government agencies’ actions against Corinthian Colleges, which is shutting down, are making it more difficult for the U.S. Department of Education to find buyers for the giant for-profit company’s colleges.
- The Department of Education is trying to shore up Corinthian’s schools at the same time it is shutting the company down, because taxpayers will be on the hook for millions of dollars in forgiven student loans if the colleges close before buyers can be found, Bloomberg reports.
- The size of Corinthian makes it nearly impossible to find enough openings at other colleges that will accept credit transfers from all of the Corinthian students. So the Department of Ed will likely have to forgive the loans of most of the students attending the Corinthian colleges that close without finding a buyer.
Dive Insight:
The U.S. Consumer Financial Protection Bureau’s lawsuit seeking a $569 million refund in private loans to students is a headache for the Department of Education because it probably discourages potential student applicants, which makes the colleges even less appealing to potential buyers. Bloomberg quotes a Wells Fargo Securities education sector equities analyst, Trace Urdan, as saying that the department didn’t realize that Corinthian might collapse when it first issued its sanctions against the company. The actions against Corinthian are also discouraging investors from putting money into the sector because they worry other for-profit educators will face the same fate.