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For-profit college chain under fire: Minnesota school to close under federal deal

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EAGAN — A chain of for-profit colleges has been ordered to stop enrolling Minnesota students in the wake of a federal investigation expected to result in the sale or closure of its schools.

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Everest Institute in Eagan is one of a dozen schools the Corinthian College chain plans to close as part of a deal with the U.S. Department of Education. Two other online Corinthian schools that enroll Minnesotans and a third that recruits students here to attend campuses in other states are expected to be sold.

About 300 Minnesota students attend the four Corinthian-owned schools. Nationwide more than 72,000 students attend the chain’s 97 schools.

The sales and closures stem from a deal with the U.S. Department of Education after Corinthian failed to provide federal officials with complete data regarding enrollment and job placement. Education Department officials also are investigating whether Corinthian used false information to recruit students.

Kent Jenkins, a Corinthian spokesman, said the chain looked individually at the sale prospects for each school and decided it would be tough to find a buyer for the Eagan campus.

Everest Institute’s closure means students such as Amber Bowers of St. Paul and Amanda Berry-Merhar of Farmington have limited time to finish their massage therapy programs. The average cost of attending Everest is about $20,000 a year.

Despite turmoil at the school’s parent organization, both Bowers and Berry-Merhar say instructors at the Eagan campus are working hard to help students complete their programs.

“They are working to keep everyone on the right path,” said Bowers, who is set to finish her studies this month.

“They’ve been very supportive,” added Berry-Merhar. “Every day they have someone coming to talk to us about our careers.”

In a statement, Jack Massimino, Corinthian chairman and CEO, said the organization’s leaders were pleased the deal with the Education Department would allow a smooth transition for students.

“This agreement allows our students to continue their education and helps minimize the personal and financial issues that affect our 12,000 employees and their families,” Massimino’s statement said. “It also provides a blueprint for allowing most of our campuses to continue serving students and communities under new ownership.”

George Roedler, who oversees institutional licensing and registration for the Minnesota Office of Higher Education, said Corinthian’s deal with the U.S. Department of Education requires the schools to “teach out” current students so they can finish their programs.

“That is the immediate concern,” Roedler said of the school’s current students. “We think by the end of the year the majority of students who are there will be taught out.”

The state has received a handful of complaints about Everest College over the years, but Roedler said there was nothing out of the ordinary. It’s uncommon for a college or university to close its doors, he said.

In June, the U.S. Department of Education began delaying financial aid payments because Corinthian had not provided enrollment and job placement data required by federal law. The chain has also faced questions over whether it altered students’ grades and attendance records.

The delayed aid payments quickly put the chain in financial trouble.

Last year, Corinthian received $1.4 billion in federal aid, according to the Department of Education. A recent report to the U.S. Senate Committee on Health, Education, Labor and Pensions shows 83 percent of Corinthian’s revenues came from federal sources.

Under the sale and closure deal, the Department of Education will release $35 million in financial aid to Corinthian schools so students already enrolled in programs can complete their studies.

For-profit colleges and universities across the country have received increased scrutiny from state and federal regulators because their students often rack up a lot of debt, but their career options after graduation don’t always match what the schools promise.

Federal data show that students at for-profit schools make up just 13 percent of total higher education enrollments, but account for 31 percent of all student loans and almost half of all student loan defaults.

In 2010, the last year for which federal data are available, 19 percent of Everest’s students had defaulted on their student loans. In 2009, their default rate was 29 percent.

Nationwide, about 22 percent of students from for-profit schools defaulted on their loans compared with 13 percent at public schools.

The Pioneer Press is a media partner with Forum News Service.

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