The thousands of students stranded when the already diminished, for-profit Corinthian Colleges, Inc. closed for good last month are stuck in a bewildering, expensive, painful morass that the U.S. Department of Education is making worse.

The department published a list of comparable institutions suitable for transfer within a 25-mile radius of their closed Heald, Everest or Wyotech schools, in California, Hawaii, Arizona, Oregon and New York, which included for-profit schools under investigation by state and federal authorities.

“Has the Department of Education learned nothing?” Senator Dick Durbin (D-Illinois) asked an empty Senate chamber last week. “How in good faith can they tell these Corinthian students, who just had their college disappear and are sitting on a pile of debt, that these are viable transfer options?”   

Of the 286 institutions recommended by the department, 174 are for-profit schools, 90 are community colleges or four-year public schools, and 22 are private, nonprofits.

An analysis of federal records by Inside Higher Ed turned up 18 of those institutions on the department’s own heightened cash monitoring list of schools whose access to federal funds they have restricted because of unfavorable audits. Five of the schools have closed.

One school recommended by the department, ITT Technical Institute, is under investigation by the Consumer Financial Protection Bureau and 16 different state attorneys general, and is on the department’s own restricted list. Other big for-profits on the list with similar challenges, like University of Phoenix and DeVry University, also made the transfer recommendation list.

But Durbin and others were also concerned that the department was not telling students that if they successfully transfer their credits to another school, and that might not be easy, they will be penalized. They lose access to a federal program that allows them to dump their federal debt within 90 days of a school closure.   

That debt can be substantial. The average tuition is $20,000 a year and much of that is paid for with loans. For-profit companies like Corinthian target low-income students and veterans because they have access to state and federal education financial assistance. Federal money accounted for nearly half of Corinthian’s annual revenue.

Maggie Thompson, with the consumer group Higher Ed Not Debt, is recommending Corinthian students to start over. “We believe the best path will be for them to get closed-school discharge and start over again at a new institution,” she told Inside Higher Ed.  "”Many of the credits they earned at Corinthian won't be transferable to nonprofit entities and community colleges.”

Starting over will be tough. Even if the kids get a break on their federal loans, they will not get credit for the limited number of Pell Grants they are eligible for lifetime. State lawmakers are considering legislation that would waive community college fees for transferring students, restore Cal Grant eligibility that was killed when the state was squeezing Corinthian, tuition recovery and state loan forgiveness.

The U.S. Senate produced a scathing report (pdf) of the for-profit college industry in 2012 and the industry was churning out unemployable graduates with huge student debt for years before that.

“Why did it take this long, given the long litany of violations to finally stop the flow of hundreds of millions of dollars—federal tax dollars—to Corinthian Colleges?” Durbin asked. “And, equally important, how many Corinthian disasters lie ahead in the for-profit college and university industry?”

It doesn’t take a college degree to hazard an educated guess at those answers.

–Ken Broder

To Learn More:

For-Profit College Fallout Continues (by Allie Bidwell, U.S. News)

List of Transfer Schools for Corinthian College Students Includes Other For-Profit Chains Under Investigation (by Ashlee Kieler, Consumerist)

After the Collapse (by Ashley A. Smith, Inside Higher Ed)

Fallout from Corinthian Collapse (by Michael Stratford, Inside Higher Ed)

Corinthian Closing What's Left of Its Battered For-Profit College Chain (by Ken Broder, AllGov California)