Dawn Lueck’s bosses were beaming. It was the height of the Great Recession, and hundreds of thousands of Americans were losing their jobs each month. But executives at her company, a network of for-profit universities branded as Heald Colleges, were ebullient.
“We knew we’d have more students coming in,” said Lueck, a former corporate finance manager for 12 Heald campuses. “They were thrilled.”
Heald, which was founded in 1863, counts governors, senators and A.P. Giannini, the co-founder of Bank of America, among its alumni. But in 2009, it became part of Corinthian Colleges Inc., a vast conglomerate that, at its height, served over 110,000 students at 120 campuses throughout North America.
The fortunes of for-profit colleges tracked the Great Recession in reverse: Corinthian’s stock price more than doubled between March 2008 and February 2009, just as unemployment spiked; enrollment increased more than 50 percent between fall 2008 and fall 2010. Widespread layoffs left people scrambling to acquire additional skills to compete in an impossible job market. And Corinthian recruiters sold prospective students on a dream: graduating college and ascending into the middle class, with career training that would pay off.
“They defrauded us, and we shouldn’t have to pay for it.”
In lawsuits, official complaints to state and federal regulators, sworn declarations submitted in Corinthian’s bankruptcy proceeding, and conversations with The Huffington Post, dozens of former Corinthian students and several former Corinthian employees said that Corinthian drowned students in debt and sent them off with meaningless diplomas that did not help -- and sometimes even harmed -- their job prospects. It illegally padded job placement statistics and gave students college credit for “externships” at fast-food restaurants. It charged students up to 10 times what a comparable community college degree would cost. More than 1 in 4 Corinthian graduates defaulted on their student loans, according to Education Department data. And for years, the Education Department not only failed to recognize the depths of the abuse, but effectively funded Corinthian’s business model, sending the company billions of dollars in financial aid to help cover students’ bills.
Corinthian’s top executives have denied wrongdoing. “Colleges like ours fill an important role in the broader education system and address a critical need that remains largely unmet by community colleges and other public sector schools,“ said Corinthian CEO Jack Massimino in a statement on the company’s website. ”Overall, our schools did a good job for the students they served.”
Amid the lawsuits and enforcement actions from state and federal regulators, Corinthian filed for bankruptcy in May -- the most spectacular in a series of for-profit college failures. By late April, the company had already sold or closed all its campuses. But students lured in by Corinthian have not received comprehensive loan relief, leaving them as the ultimate victims of the for-profit college bubble.
Now, a growing contingent of former students calling themselves the Corinthian 100 have refused to pay their debts, arguing that they were duped by a predatory lending scheme. Despite support for the debt strike from Democratic lawmakers and advocates, the Education Department has resisted demands for blanket loan relief.
“If I was dealing with people fraudulently, the government would take action against me,” said Catrina Beverly, a Heald College graduate from Concord, California, and a member of the Corinthian 100. “They defrauded us, and we shouldn’t have to pay for it.”
In 2008, Tasha Courtright visited the Everest College campus in Ontario, California, with a friend. She was not looking to pursue higher education. “The recruiter said, 'How about you? Do you want to go to school?'” Courtright recalled.
“I said I can’t afford it, I can’t do loans,” she remembered, noting that she was working a minimum-wage job at a gas station when Corinthian first recruited her. “They said, 'Let us do the numbers.' They said I qualified for Cal Grants and Pell Grants, and I wouldn’t have to pay anything.”
The recruiter called Courtright repeatedly for two days, pressuring her to make a decision. “They said classes were starting and ‘If you don’t do it now, you never will.’ So I went down again and signed up.” Courtright spent four years at Everest, earning a bachelor’s degree in applied business management. She said recruiters promised she wouldn’t pay a dime; she ended up with $41,000 in student debt.
High-pressure sales tactics like that were deliberately targeted at vulnerable demographic groups, including single mothers and the unemployed, according to Lueck, the former Corinthian manager. Recruits were often the first in their families to attend college. Almost anyone could qualify. Laurie McDonnell, a librarian at the Everest-Ontario Metro campus, resigned after learning that her school had enrolled a man who read at a third-grade level.
The goal was simple: profits. Smaller chains like Lincoln Tech or DeVry used to dominate the for-profit college industry. But toward the end of the last decade, larger, publicly traded companies took over. By 2009, three-quarters of all U.S. students enrolled in for-profit colleges were at schools owned by a corporate conglomerate or private equity firm. Goldman Sachs owns around 40 percent of Education Management Corporation, another operator of for-profit colleges.
Many for-profit college companies own multiple university brands. Corinthian, which traded on Nasdaq, ran Everest, Wyotech and Heald Colleges. The consolidation of the industry changed how for-profit schools operated, argues Elizabeth Baylor, senior investigator on a landmark 2012 Senate Health, Education, Labor and Pensions Committee study of for-profits. “Student success was not the primary focus of the entity. It was returning investor value,” Baylor, who now works at the Center for American Progress, told HuffPost.
One-quarter of the average for-profit college budget goes to marketing and recruitment, Baylor said. The goal is to capture and retain students, and squeeze as much money out of them as possible. The 2012 Senate report found that Corinthian’s students defaulted on their loans at a rate that was “by far the highest of any publicly traded company” that investigators scrutinized.
Lueck explained that Heald would forecast higher annual enrollment targets for every campus across its network, putting pressure on recruiters to deliver. “You get students in, establish trust and a connection, and find out what their hot buttons are,” she said.
Some students wanted flexible schedules so they could raise their children; others wanted fast paths to a degree or assurances about future employment. “People reveal things about themselves without knowing it, and you use that to guide them,” Lueck said. “Everything is geared toward enrolling and retaining students. Morality takes a back seat, and you become part of the system.”
“Everything is geared toward enrolling and retaining students. Morality takes a back seat, and you become part of the system.”
Corinthian General Counsel Stan Mortensen responded by saying that 10,000 people worked for the company at its peak. “With that number of people, I’m sure you can find someone who will say almost anything,” he told HuffPost. He pointed to the 10,000 signatures on a Change.org petition supporting Heald Colleges and a handful of positive testimonials from Corinthian students and employees, who were “proud of the institutions they attended and worked for.” The petition was initiated by Eeva Deshon, the president and CEO of Heald.
In their sworn declarations submitted in Corinthian’s bankruptcy proceeding, students corroborated Lueck’s claims. They said Corinthian recruiters cited specific numbers of graduates who obtained jobs in their fields, typically over 80 percent. The recruiters identified starting salaries well above entry level and promised help with lifelong counseling and accreditation for specialized work. Campuses were adorned with photographs of smiling graduates at their new careers.
The financial aid process, in contrast to the pitch, was typically quick and vague, without even a clear explanation of how much classes cost. “They had the papers literally ready,” said Nathan Hornes, a high school dropout who moved to California from Columbia, Missouri, seeking a career in music. “They are so good at saying, 'Here’s what you need to punch in on the computer, let’s create a PIN, let’s do this.'” Hornes worked toward a GED and took business classes concurrently at Everest-Ontario Metro, eventually running up over $60,000 in debt, he told HuffPost and wrote in a sworn declaration.
According to Lueck, students signed an open-ended “master promissory note,” allowing the school to recertify new loan amounts every year. This would happen annually through a chaotic process known as repackaging, in which students would turn in financial information and the staff would shuttle them into new loans and grants. Corinthian students attracted huge amounts of financial aid money from the federal government: Close to 90 percent of the company's revenue, around $1.4 billion per year, came from taxpayers.
Financial aid officials told Frances Hutchison, a paralegal student at Everest-Ontario Metro, that she signed up for an “opportunity grant,” which would cost her $500 upfront (the "grant" was really a loan from the school to the student). She asked for proof that she had signed up and was given a form with an electronic signature of her name generated by a company called DocuSign. “I called DocuSign. They pulled up the email and IP address of who created that signature,” Hutchison told HuffPost. “The IP address was a computer located in Venice [California] associated with Corinthian.” DocuSign advised Hutchison to seek legal advice, she said. Corinthian did not directly respond when questioned about this, but said generally that former students had an “overwhelming positive experience.”
Just days before her school’s closure, Everest paralegal student Tiffany Contreras went to the financial aid office to settle an issue with her credits. According to her sworn declaration, the representative “said she was glad I came in because she needed to get me to sign new papers for the $500 loan to the school. She told me that the school had been repackaging students’ loans without their permission until it found out it could not do that.”
Lueck, the former corporate finance manager, said the loan process moved so rapidly that students may not have understood they were giving college staff permission to sign them up for numerous loans. Sarah Dieffenbacher, a criminal justice major, rang up over $110,000 in loans without ever earning a bachelor’s degree, she wrote in a sworn declaration. Officials would pull Dieffenbacher out of class during finals week to set her up for the next school year. “They told me to log into the computer loan account, and said words to the effect, ‘Just put in your password and we’ll handle the rest,’” she wrote.
Although most loans were federally issued, Corinthian also pushed some students into expensive private loans. The private loan program, known as Genesis, was designed for people with bad credit, according to Lueck. In a September 2014 lawsuit, the Consumer Financial Protection Bureau alleged that Genesis loans carried interest rates double those of federal student loans and had to be partially paid back while students were still in school. Staffers would pull students out of class, and even withhold diplomas, to induce students to pay back Genesis loans, the CFPB claimed.
Still, 60 percent of those with Genesis loans defaulted within three years. “I never remember seeing a screen that clearly summarized the details of the loan,” Lueck said. As interest and late fees accrued, she said, students had trouble accessing information on their full loan balances.
Tasha Courtright claimed in both an interview and her sworn declaration that she was promised that Cal Grants, a California education aid program, would cover her tuition. “They said there was no way I would be denied,” Courtright said. “They neglected to tell me I didn’t qualify for Cal Grant until I took 36 credits because I was out of high school too long.” Even then, Corinthian officials promised Courtright that the grants would be retroactively applied. “Then I got a Cal Grant letter. It said I can only use the grant for future classes.” Everest would also hoard Courtright’s grant money, delaying disbursements for her living expenses for up to a year.
In interviews and legal filings, Corinthian students said they paid top dollar for what they characterized as a substandard classroom experience. Lueck said that Heald Colleges fired full-time teaching staff and used adjunct professors to teach classes in order to save money. At least one of Dieffenbacher's legal instructors had been disbarred, the criminal justice major claimed in a sworn declaration. One student said that final exams were “open-book.” Another, Nadia Akins, saw that a fellow student had the answers taped to the bottom of her shoe. “I reported this to the teacher, and the teacher kicked me out of the classroom,” Akins said in her legal declaration. Hornes described a classroom environment akin to summer camp.
“Several students felt like the coursework was too hard, but a junior high student could do what we were doing. A simple Google search could get the homework done,” Hornes said in an interview. “I had several finals where I was playing board games. I was thinking, 'Why am I going here? Are you kidding me, we’re playing Monopoly right now?'”
Students could also receive course credit through externships, unpaid positions in their fields that career services personnel often promised would lead to full-time work. After running up $26,000 in debt in one year of study, Catrina Beverly obtained an externship in medical office administration. “For four hours a day, on top of a 40-hour workweek, all I did was scan documents into the computer,” she said. “I went above and beyond, straightened up the office, so they’d want to hire me. At the end, I found out they would not consider me because I wasn’t fluent in Spanish.”
Nathan Hornes' school told him that his carhop job at fast-food chain Sonic qualified for course credit.
“My externship was a job I had for two years,” Hornes said. His school told him that the carhop job at fast-food chain Sonic qualified for course credit. “They started calling my manager, asking about getting people hired at Sonic. It’s a joke,” he added.
In response, Corinthian’s general counsel submitted testimonials from former students like Jenny Antonio, who said she enjoyed the “curriculum set for quicker development and readiness for employment in different fields.” Another former student, Tami Turner, wrote, “Without access to colleges like Heald, marginal groups will have little to no access to an education, and will continue to languish in low-wage, dead-end jobs, or worse.”
Aeyla Admire, a student at Everest College in Reseda, California, did an externship at an OB-GYN office. “I experienced unwelcome physical and sexual advances by the doctor,” Admire wrote in a sworn declaration submitted in the Corinthian bankruptcy proceeding. “When I complained to the case manager for my externship, she told me that I should not change my placement. ... She said that if I were to pursue the issue, it would look bad for me, and it would be very hard to find another job. She told me words to the effect that ‘all doctors are like that,’ and that they have the ‘education to do whatever they want.’” Aeyla eventually quit.
As Corinthian's enrollment expanded in the Great Recession, career services counselors were not equipped to handle the crush of graduates, and jobs were difficult to secure in a sluggish labor market. Appointments with career services would have to be made weeks in advance. Counselors forwarded students Craigslist ads.
Some Corinthian graduates learned that having the school on their resume was more of a hindrance than a help. Obsolete coursework bore little relation to the skills needed for employment. Several students described nightmare job interviews during which they realized they weren't prepared for the intended positions. One paralegal student, Isabel Carranza, panicked when she “realized that I did not learn anything that paralegals need to know,” according to a sworn statement in the bankruptcy case. While Corinthian colleges were accredited and eligible for federal financial aid, Carranza wrote that she belatedly learned her paralegal program was not on the American Bar Association's approved list, despite promises from Corinthian recruiters and promotional materials.
At best, potential employers had never heard of the colleges; at worst, they refused to accept them as legitimate. Once law enforcement began circling around Corinthian, the negative publicity became detrimental in the job market.
Hornes had an employer at a bank laugh in his face when he said he went to Everest, telling him he would never hire anyone from that school. “I’ve been told by three attorneys, 'If you came to me looking for a job with that degree, you can forget it,'” said Hutchison, the paralegal student who has $33,000 in outstanding loans. She said she only obtained her job as a legal secretary after taking Everest off her resume.
As the Education Department was pushing Corinthian to verify its job placement statistics, the company’s career counselors grew desperate. According to documents obtained by The Huffington Post in 2013 and cited by California Attorney General Kamala Harris and the CFPB in lawsuits, Corinthian paid temp agencies and employers to place graduates for short periods to pad their job numbers. Corinthian told HuffPost in 2013 that it rejected this allegation. The company’s then-spokesman, Kent Jenkins, pointed reporters to data showing that 69 percent of Everest students gained jobs in their field within 18 months of graduation and argued that paying companies to hire graduates was a “one-time-only initiative” at an Everest College campus in Decatur, Georgia. But Nathan Hornes and Dawn Lueck told HuffPost the practice was more widespread.
Catrina Beverly, who worked at a customer service call center before attending Heald College, recalled in an interview that she received an out-of-the-blue phone call from her career counselor months after graduating, asking if she had work or needed assistance. “He said, ‘How would you feel about a call center job?’ I’m like, that’s what I went to college to get away from!”
By 2014, Corinthian was in serious trouble. State attorneys general and the Consumer Financial Protection Bureau filed complaints against Corinthian, and the Education Department fined the company $30 million for misrepresenting job placement rates to current and prospective Heald College students. The department also slowed financial aid disbursements to Corinthian, which had virtually no cash reserves. “When you looked at the profits during the peak enrollment period of 2008-2010, they didn’t save revenue for a rainy day,” said Baylor, the former Senate investigator. “They returned it to investors.”
The company’s executives did well, too. Massimino, the Corinthian CEO, earned $3 million in 2010, and four other executives made over $1 million that year. Between June 2013 and September 2014, the most recent period for which data are available, Corinthian insiders, including Massimino, sold 1.2 million shares of Corinthian stock worth over $400,000, according to the company’s filings with the Securities and Exchange Commission.
After selling off 56 campuses last fall to ECMC, a debt collector with no history of educating students, Corinthian shut down its remaining 30 schools on April 27 and filed for bankruptcy. “Corinthian did everything possible to try to sell our schools to responsible owners so that students would be able to continue their education,” said Mortensen, the general counsel.
“Who will hire someone from a school with a soiled reputation?”
Frances Hutchison had just graduated when she heard the news. “Who will hire someone from a school with a soiled reputation?” she asked. Other students were weeks away from degrees when their schools closed and may find it difficult to transfer Corinthian credits to legitimate colleges. Isabel Carranza hadn’t even opened the $380 worth of books she had bought for the upcoming school year. But she couldn’t return them.
Students have begun to fight back. Public Counsel, a pro bono law firm in Los Angeles, is one of three firms representing some 500,000 former Corinthian students with potential aggregate claims of $25 billion in Corinthian’s bankruptcy proceeding. “This is among the most egregious fraud that I in 25 years of practice have ever seen,” said Anne Richardson, associate director of the Opportunity Under Law section at Public Counsel.
Nathan Hornes, who now works at a Smashburger and said his commute is so long and costly that some days he can’t afford food, started calling friends from school even before the bankruptcy. “I started organizing. I had 130 students in three weeks. We had meetings in a coffee shop across the street,” he said. Hornes and Tasha Courtright started a Facebook group called the Everest Avengers and were among the first students to decide to go on a debt strike, refusing to pay back their loans. The Debt Collective, an organization that grew out of the Occupy Wall Street movement, contacted Hornes and Courtright, and created what is now the Corinthian 100. “More students are joining every day,” Hornes said.
Sen. Dick Durbin (D-Ill.) wants the Justice Department to hold Corinthian executives personally responsible for what transpired. “This is our money,” Durbin said on the Senate floor last month. “Hundreds of millions of dollars from taxpayers going to these rotten schools that are abusing children, leaving them deeply in debt and then going out of business.”
Nathan Hornes now works at a Smashburger and said his commute is so costly that some days he can’t afford food.
Under the federal Higher Education Act, students whose colleges close or who are victims of fraud by those schools may petition to have their loans forgiven. The Corinthian 100 want to extend that benefit to all students taken in by Corinthian. But the Education Department has been hesitant to allow blanket forgiveness or even implement a “defense to repayment” process, hinting instead at a plan in which individual students would have to prove they were defrauded. Yet the department has already fined Corinthian $30 million for misleading students with bogus job placement statistics. “It makes me sick to my stomach,” said Courtright. “They already have the proof or they wouldn’t have fined them.”
Courtright, who is hesitant to marry her fiancé because she fears he will get saddled with her debt, has met with Education Department officials on two occasions to press for comprehensive debt relief for Corinthian students. “We are the ones who had our lives destroyed by Corinthian,” she said. “There are students I personally know who are going to be homeless with their children. If I didn’t live in low-income housing, I would be homeless. Nobody in the government appears to have the students' interests at heart.”
The Education Department and CFPB negotiated $480 million in debt relief on private Genesis loans, but most of those loans are in default and have been deemed uncollectible. Granting relief to all Corinthian students would cost billions, which has made the government leery. Education Department officials have even pressured students at Corinthian campuses that were closed to transfer to other for-profit colleges. But “students deserve those protections” from fraud, said Baylor of the Center for American Progress. “You can’t turn around and say that this outstanding student loan debt is too much to write off.” Heald laid off Dawn Lueck in 2012. She now volunteers with the Debt Collective, helping former Corinthian students understand their loan situations. Like many for-profit college employees, Lueck had also been a customer. She holds degrees from the University of Phoenix and ITT Tech, where she started working at the front desk when she was 18.
“It worked for me, and I really wanted to believe in it,” Lueck said. “When you’re meeting with these students, you want to believe what you’re telling them is the truth. ... When I left there, they had literally started chipping away at my soul.”