And despite its spotty track record in otherstateswhere former students have filed lawsuits against the company formisleading recruitment tacticsand its willingness to enroll students who oftenget stuck with significant student loans, the city of Milwaukee has approved an$11 million tax-free bond for developing Corinthian’s proposed facility onNorth Sixth Street.
Although the city Redevelopment Authority hasapproved the bond, the deal isn’t done yet, and must be approved by the Boardof Zoning Appeals (BOZA).
On Tuesday, Metropolitan Milwaukee Association ofCommerce head Tim Sheehy, who supports privatizing public education, held awelcoming meeting for Everest College, and the schoolhas hired PR professional Evan Zeppos to make its case.
Paul de Giusti, Corinthian’s vice president forlegislative affairs, said the college would offer nine-month diploma programsin Milwaukee,initially in the field of allied health, such as medical assisting and medicalbilling and coding. Courses are split between the classroom and labinstruction, and in the last 30 days students are placed in an externshipforexample, in a health clinic.
“The great hope is that this is where they’ll beemployed in the future,” de Giusti said.
But not everyone is thrilled about Corinthian’s Milwaukee plans.
“Though I am a major supporter of higher education,I recognize the need to not allow what may be predatory institutions to locatehere,” Alderwoman Milele Coggs wrote to the BOZA.
Joanne Passaro, provost and vice president foracademic affairs at Carroll University, is criticalof for-profit institutions that she says “bring in students without caring ifthey stay in.”
Passaro said the business model of many for-profitcolleges relies on high enrollment, cheap facilities that often lacklaboratories or libraries, and no full-time or tenured faculty.
“They’re in it for the profit,” Passaro said.
Dangerously High Loan Default Rate
Corinthian Colleges Inc. is one of many for-profitcolleges that target low-income, minority or untraditional students seekinghigher education. The problem, though, is that Corinthian’s business model maynot be in its students’ best interests. In fact, critics charge that Corinthianengages in the “subprime student loan racket,” as Washington Monthly magazine put itmeaning that loans are extendedto students who are unlikely to pay them off or even finish their educationwith a degree.
According to data from the federal government, awhopping 29.7% of Corinthian’s students default on their student loans withinthree years of leaving school. The national average is 11.8%about one-third ofCorinthian’s averagewhile the average three-year default rate at allfor-profit colleges is 21.2%.
What’s more, about 60% of Corinthian’s institutionsaround the country have a default rate over 30%. That could cause problems forthe company, since regulations set to kick in by 2014 will prohibit federallybacked student loans from being extended to students at colleges with athree-year default rate that exceeds 30%.
Yet Corinthian is heavily reliant on federal studentloans; the college estimates that 89.9% of its revenues come from them.
At least federal loans offer some consumerprotection for the borrowers, even if they drop out. But Corinthian studentsare also obtaining private loansor loans extended by Corinthian itselfthatare far more difficult to pay off, with higher interest rates (sometimes ashigh as 20%, “on par with the most predatory credit cards,” Washington Monthly noted) and fewerconsumer protections. And thanks to bankruptcy rules passed by theRepublican-controlled Congress in 2005 and signed by then-President Bush, it’sdifficult to have these loans forgiven even if an individual declaresbankruptcy, leaving a former student with a pile of debt that’s difficult topay off.
De Giusti acknowledged that projections show thatCorinthian has a high default rate. He said each campus would have a defaultspecialist and students would have counseling to reduce their chances ofdefaulting on loans.
