Corinthian Colleges Files Bankruptcy After Defrauding 72,000 Students - Executives Shield Assets

Corinthian Colleges abruptly shut down all 28 of its remaining campuses on April 26, 2015, stranding 16,000 students mid-semester, and filed for Chapter 11 bankruptcy protection on May 4, 2015, after months of federal and state investigations exposed systematic fraud affecting over 72,000 students. The bankruptcy filing demonstrated the two-tiered bankruptcy system created by the 2005 Bankruptcy Act: Corinthian executives used Chapter 11 to shield assets and restructure liabilities, while the students they defrauded remained trapped in non-dischargeable debt.

Corinthian’s business model was pure fraud: falsify job placement rates (inflated by up to 80%), pressure low-income students into enrollment with false promises, load them with federal and private loans (Genesis loans at 15% interest that Corinthian originated itself), provide near-worthless education, and extract maximum revenue from federal aid. CEO Jack Massimino received over $10 million in compensation between 2010-2014 while building a house of cards entirely dependent on $1.4 billion in annual federal student aid.

When federal investigations cut off aid in June 2014, the company immediately collapsed, proving it provided no actual educational value—it was simply a federal aid extraction scheme. The bankruptcy allowed Corinthian to restructure and protect remaining assets, while 72,000+ former students were left holding $3.5 billion in federal loans plus additional private loans, all non-dischargeable under the 2005 bankruptcy law. Students couldn’t discharge their debt even though the “education” they purchased was fraudulent and the institution bankrupt.

The bankruptcy filing came one week after 100 former Corinthian students launched America’s first student debt strike (the “Corinthian 100”), refusing to repay loans for fraudulent education and demanding the Department of Education cancel debt using “defense to repayment” provisions. The strikers argued—correctly—that requiring them to repay debt for fraudulent services while allowing Corinthian to use bankruptcy to shield assets epitomized the rigged system where corporate fraud is rewarded and victims are punished.

Corinthian’s bankruptcy followed the template later used by Purdue Pharma (Sackler family): use corporate structure to extract maximum wealth while operating fraudulently, then deploy bankruptcy to shield assets while victims (students with debt, opioid victims with damages) remain liable. The students’ loans were guaranteed by taxpayers, so Corinthian extracted federal funds, executives extracted salaries and profits, and taxpayers absorbed losses—the perfect kleptocratic circle. This case became the defining example of for-profit college fraud and helped catalyze regulatory efforts that Betsy DeVos would later dismantle after 2017.