Federal Government Cuts Off Corinthian Colleges - 72,000 Students Trapped by Fraud

The U.S. Department of Education imposed a 21-day hold on all federal aid flowing to Corinthian Colleges on June 12, 2014, after the for-profit chain—operating as Everest College, WyoTech, and Heald College—refused to provide documentation substantiating falsified job placement rates. The action came after 20 states, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and the Justice Department launched concurrent investigations into systemic fraud affecting 72,000 students and 12,000 employees across more than 100 campuses.

The Department of Education had sent a letter in January 2014 demanding student-level data to verify job placement rates Corinthian reported to students, accreditors, and regulators. When Corinthian refused full compliance, the government cut off the federal aid spigot that funded the company’s entire business model. Investigations revealed Corinthian had inflated job placement rates by as much as 80% and counted graduates as “employed” if they worked even a single day in any job, regardless of whether it was in their field of study.

The Consumer Financial Protection Bureau documented a predatory lending scheme where Corinthian steered students into high-interest private loans (Genesis loans) that the company originated itself, charging interest rates up to 15% on loans with virtually no underwriting standards. The company targeted low-income students, veterans, and single mothers with aggressive recruitment tactics, false promises of high-paying careers, and pressure to sign up immediately. Students graduated with $30,000 to $75,000 in debt for degrees that employers did not recognize and that left them worse off than before enrollment.

Corinthian’s publicly-traded parent company extracted millions in executive compensation and shareholder profits while loading students with non-dischargeable debt backed by taxpayers. When federal investigations intensified in 2014, the company’s business model collapsed immediately, demonstrating that the entire enterprise was built on federal aid fraud rather than educational services. The company had received $1.4 billion annually in federal student aid—approximately 90% of its revenue.

On July 3, 2014, facing financial collapse, Corinthian agreed to execute a controlled shutdown of 12 schools and sell 85 others. But 72,000 students were left in limbo: continuing meant accumulating more debt for worthless credentials; dropping out meant being liable for loans already taken. The Corinthian case became the defining example of for-profit college fraud and would spark the first-ever student debt strike (the “Corinthian 15” in 2015) as borrowers demanded relief from fraudulently-incurred debt.