Shares of Corinthian Colleges Inc., a
Santa Ana-based vocational school operator plummeted after a report
revealed that only a small number of its students are repaying federal
loans, placing future aid in deep trouble.
Corinthian Colleges shares are down $1.39, or 21%, at $5.27. Its
shares closed down more than 20% to a market value of about $460
million. This is partly due to the data recently released by the
Department of Education. It suggest that the for-profit education
firm could be blocked from some federal student loan grants in the
future.
The Federal Education Department issued a report revealing that
lesser than 20% of students at Corinthian and some other for-profit
school operators are repaying federal loans.
The department is now thinking of using the loan repayment figures
to establish whether school operators are still fit for federal
loans.
Under the suggested rule, which is scheduled to take effect next
year, if lesser than 45% of former students are paying off loans, or
if the debt burden of former students is more than 20% of their
income, students at for-profit schools would be prohibited from
federal loans.
According to an analysis of Education Department data by the
Oakland-based nonprofit Institute for College Access & Success,
for-profit colleges have an average 36% student-loan repayment rate.
On the other hand, the repayment rate for public universities is 54%,
while private colleges are at 56%, according to federal data.
Corinthian operates more than 100 campuses in both U.S. and
Canada. This for-profit education firm offers degrees in healthcare,
criminal justice, and other fields.
The company and other for-profit schools saw big growth during the
recession, but this year they have come under fire because students
took on more debt they couldn?t afford.
Looking at the federal data it shows that Corinthian?s Everest
College, which offers degree in medical assisting, massage therapy,
criminal justice, business administration, and other areas had one of
the lowest repayment rates, which is at 8%.
Loan repayment is not the only issue that Corinthian and similar
schools are facing. They are also under fire for their recruiters
alleged engagement in fraudulent activities. A Government
Accountability Office report discovered that recruiters at 15
colleges, including those operated by Corinthian, misled students to
bolster enrollment.