Corinthian Colleges Abruptly Closes All Remaining Campuses, Stranding 16,000 Students After Widespread Fraud Findings

Corinthian Colleges Inc., one of the largest for-profit college chains in the United States operating Everest College, Heald College, and WyoTech brands, announced on April 26, 2015, that it would immediately cease operations at all remaining campuses, abruptly closing 28 ground locations and stranding more than 16,000 students mid-semester without credentials or clear paths to complete their programs. The sudden closure came after months of federal and state regulatory actions exposing widespread fraud in recruitment, job placement reporting, and financial aid practices, culminating in the Department of Education’s determination that Corinthian had “engaged in widespread and pervasive misrepresentations” about student employment prospects and had systematically falsified job placement rates to deceive students and justify federal aid eligibility. The collapse marked the largest for-profit college closure in U.S. history at the time and exposed the systematic fraud underlying much of the for-profit higher education industry’s explosive growth during the 2000s, triggering an avalanche of investigations, lawsuits, and ultimately $5.8 billion in student loan cancellations that would take seven more years to achieve.

Corinthian had operated as a publicly-traded corporation since 1999, growing aggressively through the 2000s to reach a peak of 105 campuses enrolling approximately 110,000 students in 2010. The company operated three main brands: Everest College offering associate degrees and diploma programs in healthcare, business, and skilled trades; Heald College offering business and technology programs primarily in California; and WyoTech offering automotive and technical training programs. Like other major for-profit college chains, Corinthian derived approximately 85-90 percent of revenue from federal student aid programs, making federal Title IV aid the lifeblood of the business model. This heavy dependence on federal aid created powerful incentives to maximize enrollment regardless of student qualifications or likelihood of success, leading to the systematic fraud that would ultimately destroy the company.

The collapse was precipitated by aggressive enforcement actions from multiple government agencies beginning in 2013. California Attorney General Kamala Harris sued Corinthian in October 2013, alleging that the company engaged in false advertising and deceptive marketing by making false claims about job placement rates, misleading prospective students about the likelihood of employment after graduation, and using exaggerated or fabricated employment statistics to recruit students and justify high tuition costs. Harris’s investigation found that Corinthian systematically misrepresented job placement rates, counting any employment including brief temp work completely unrelated to students’ programs of study, and in some cases simply fabricating employment data to inflate reported placement rates above the thresholds required for maintaining accreditation and federal aid eligibility.

In 2014, the Consumer Financial Protection Bureau (CFPB) filed a federal lawsuit against Corinthian alleging that the company engaged in illegal lending practices by steering students into high-cost private loans with inflated interest rates, misrepresenting job prospects to induce borrowing, and using deceptive marketing to conceal the true costs and risks of the debt students were incurring. The CFPB alleged that Corinthian operated a predatory lending scheme where the company originated private loans to students directly through a subsidiary lender, Genesis, then sold those loans to investors while retaining servicing responsibilities. This vertical integration allowed Corinthian to profit from both tuition revenue and from finance charges on the private loans, creating dual revenue streams from the same students while loading them with unpayable debt.

The Department of Education escalated enforcement in June 2014 by imposing severe restrictions on Corinthian’s access to federal student aid, including a requirement that the company post a $23.3 million letter of credit and a limitation to receiving federal aid only on a monthly “heightened cash monitoring” basis rather than the advance payment basis normally available to colleges. These restrictions, imposed based on findings that Corinthian had provided false information about job placement rates and failed to maintain adequate financial resources, threatened the company’s cash flow and ability to operate, since Corinthian depended on receiving federal aid advances to meet payroll and operational expenses. Without the ability to receive aid advances and with the requirement to post substantial collateral, Corinthian’s business model became financially unsustainable.

In response to the Department of Education’s sanctions, Corinthian attempted to execute a “teach-out” plan in fall 2014, announcing it would sell or close most of its campuses in a managed wind-down designed to allow current students to complete their programs. The company sold 85 campuses to Education Credit Management Corporation (ECMC), a nonprofit student loan guaranty agency that established a new entity called Zenith Education Group to operate the purchased campuses. However, the remaining campuses that could not be sold faced mounting financial pressures as regulatory scrutiny intensified and enrollment plummeted due to negative publicity about fraud findings.

The Department of Education’s findings about Corinthian’s fraud were damning. The agency determined that Corinthian had engaged in “widespread and pervasive misrepresentations” by systematically overstating job placement rates across numerous programs and campuses, promising students that they would find employment in their fields of study when Corinthian had no reliable basis for such promises, and falsifying placement data submitted to accreditors and used in marketing materials. Internal Corinthian documents revealed that company executives were aware that reported job placement rates were inflated and that actual graduate employment outcomes were far worse than advertised, but continued to use the false data to recruit students and to maintain accreditation and federal aid eligibility.

Specific examples of Corinthian’s fraud included reporting job placement rates of 85-100 percent for programs where actual placement in field-related jobs was below 50 percent; counting graduates as “employed” if they worked in any job for even a single day regardless of whether the employment was related to their training; fabricating employment verification records by having staff call graduates and obtain vague confirmations of any work activity then categorizing it as field-related employment; and systematically excluding from placement rate calculations any graduates who could not be contacted, even though inability to contact graduates likely correlated with unemployment. These methodological manipulations allowed Corinthian to report inflated job placement rates that bore no relationship to actual graduate employment outcomes, deceiving prospective students about the value of Corinthian credentials and deceiving accreditors about program quality.

The widespread fraud findings vindicated student complaints that had been mounting for years. Thousands of Corinthian students and graduates had reported that they were promised job placement assistance and high placement rates during recruitment, but after completing expensive programs found that Corinthian provided little or no actual job placement support, that employers did not recognize or value Corinthian credentials, and that they could not find employment related to their training despite carrying tens of thousands of dollars in student debt. Many students reported that they could have obtained the same employment they eventually found—often in retail, food service, or other entry-level positions unrelated to their programs—without attending Corinthian at all, meaning the time and money spent on Corinthian programs provided no benefit while imposing crushing debt burdens.

When Corinthian announced the April 26, 2015 closure of all remaining campuses, approximately 16,000 students were actively enrolled and more than 8,000 employees were immediately terminated. Students attending classes arrived at campuses to find locked doors and shutdown notices, with no advance warning that allowed them to prepare for the closure or to arrange transfers to other institutions. Many students had completed most of their programs and were close to graduation when Corinthian closed, leaving them without credentials after investing months or years and tens of thousands of dollars in tuition. Other students were in early stages of programs and faced decisions about whether to attempt to transfer credits to other institutions—often finding that other colleges would not accept Corinthian credits due to quality concerns—or to simply abandon their educational pursuits after incurring debt with nothing to show for it.

On May 4, 2015, just eight days after announcing the closures, Corinthian Colleges Inc. and twenty-four of its subsidiaries filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware, reporting assets of approximately $143 million against liabilities of approximately $143 million, with the company essentially insolvent. The bankruptcy filing revealed that Corinthian executives had extracted substantial compensation from the company while it was engaged in systematic fraud, with CEO Jack Massimino receiving over $20 million in total compensation during the years leading up to the collapse despite presiding over the fraudulent operations that defrauded students and taxpayers.

The bankruptcy proceedings would ultimately yield almost nothing for students seeking restitution. While various government agencies won large judgments against Corinthian—California won a $1.1 billion judgment in 2016 including $820 million in restitution for students, and the Consumer Financial Protection Bureau won a $550 million judgment—these judgments could not be collected because Corinthian had no assets. The company had been liquidated, its valuable assets had been sold during the teach-out process, and what remained was transferred to bankruptcy creditors. Students who had been defrauded and who were owed restitution under the California judgment received nothing directly from Corinthian, leading the California Attorney General’s office to publicly acknowledge that while the legal victory was important for establishing Corinthian’s fraud, actual recovery for students would have to come from federal student loan discharge rather than from collecting the judgment against the bankrupt company.

However, Corinthian’s collapse catalyzed the modern student debt cancellation movement. Fifteen former Corinthian students formed a group that became part of the Debt Collective, an outgrowth of Occupy Wall Street, and in February 2015 launched the first student debt strike in history, publicly refusing to repay their federal student loans and demanding that the Department of Education cancel the debts under a then-obscure provision called “borrower defense to repayment” that allows loan cancellation when schools defraud students. The debt strikers were mostly working-class people of color who had been targeted by Corinthian’s predatory recruitment, had incurred substantial debt for credentials that proved worthless, and who decided to take the substantial risk of default rather than continuing to pay for an education that had left them worse off financially than if they had never enrolled.

The Corinthian debt strike drew national attention to the plight of students defrauded by for-profit colleges and put political pressure on the Department of Education to provide loan relief beyond the narrow “closed school discharge” that automatically cancelled loans only for students who were enrolled when schools closed. Under closed school discharge rules, students who had already graduated from Corinthian or who had withdrawn before the closure date received no relief even though they had been subjected to the same fraudulent recruitment and false job placement claims as students enrolled at closure. The debt strikers argued that all students defrauded by Corinthian deserved loan cancellation regardless of when they attended or whether they completed programs, and that the Department should use borrower defense authority to provide comprehensive relief.

The Obama Administration initially responded cautiously to borrower defense claims, processing applications individually and granting relief to only a small percentage of applicants. However, the mounting evidence of systematic fraud at Corinthian—not just isolated misrepresentations but company-wide policies of falsifying job placement data and deceiving students about employment prospects—eventually led the Department to find that fraud was pervasive enough to justify group relief. In 2015, the Department announced that it would automatically discharge loans for students who attended certain Corinthian programs where fraud was particularly egregious, providing the first group discharge in the borrower defense program’s history and establishing precedent that systematic fraud justified automatic relief rather than requiring individual applications.

However, comprehensive relief for Corinthian students would take seven more years to achieve. The Trump Administration under Secretary of Education Betsy DeVos reversed course on borrower defense processing, blocked pending claims, granted only partial relief even when fraud was proven, and fought in court against efforts to expedite processing or expand eligibility. The lawsuit Sweet v. DeVos (later Sweet v. Cardona) challenged the Department’s refusal to process borrower defense claims and its arbitrary denials of relief, leading to years of litigation while hundreds of thousands of defrauded students remained in limbo carrying debts from fraudulent programs.

Finally, on June 1, 2022—seven years after Corinthian’s collapse—the Biden Administration’s Department of Education announced that it would cancel all federal student loans for all borrowers who attended any Corinthian campus at any time between 1995 and 2015, eliminating $5.8 billion in student debt for approximately 560,000 borrowers. This full discharge represented the largest single student debt cancellation in history at that time and vindicated the debt strikers’ years-long campaign for comprehensive relief. The Department’s announcement acknowledged that Corinthian’s fraud was so widespread and pervasive across all campuses and programs over such an extended period that individual findings were unnecessary—the company’s entire operation was fraudulent and all students who attended deserved relief.

The $5.8 billion cancellation revealed the staggering scale of harm that a single for-profit college chain had inflicted on students and taxpayers. Over twenty years of operations, Corinthian had enrolled more than 560,000 students in programs marketed with false job placement claims and promises of career advancement that the company knew it could not fulfill. Those students had borrowed $5.8 billion in federal loans to pay Corinthian’s tuition—money that flowed directly to the company and its investors—while the students received credentials that had little or no value in the job market. Many Corinthian students ended up in exactly the same low-wage service jobs they would have obtained without attending college, except now they carried tens of thousands of dollars in student debt and had spent months or years in programs that did not advance their careers.

The loan cancellation provided crucial relief to Corinthian students, but it did not make them whole. Students who had already made years of loan payments before the cancellation did not receive refunds of those payments, meaning they had paid Corinthian for credentials that should never have been offered. Students who had defaulted on Corinthian loans before the cancellation had already suffered credit damage, wage garnishment, and tax refund seizures that were not remediated by the late cancellation. Students who had used private loans to attend Corinthian in addition to federal loans had only their federal debt cancelled, remaining liable for private debt from the fraudulent education. And the opportunity costs—years of time spent in Corinthian programs that could have been spent working, attending legitimate institutions, or pursuing other opportunities—could never be recovered.

The Corinthian collapse also exposed the inadequacy of regulatory oversight during the company’s years of operation. Corinthian had been subject to regular Department of Education program reviews, accreditation reviews, and state oversight, yet the systematic fraud in job placement reporting had gone undetected or unaddressed for years. Accreditors had accepted Corinthian’s inflated job placement data without independent verification, essentially rubber-stamping quality claims that were false. State regulatory agencies with authority over proprietary schools had failed to investigate student complaints or to scrutinize employment claims. Federal program reviews had focused on administrative compliance with aid disbursement procedures rather than on verifying the accuracy of job placement data that determined accreditation and student enrollment decisions.

This regulatory failure allowed Corinthian to defraud hundreds of thousands of students over two decades, enrolling each new cohort with the same false promises that had already harmed previous cohorts, while regulators failed to detect the pattern or to shut down the fraud. The belated enforcement actions by California, the CFPB, and the Department of Education came only after overwhelming evidence of fraud had accumulated and after journalists and advocates had publicized student complaints that regulators should have investigated years earlier. The delayed response illustrated that the regulatory system was designed to maintain schools’ access to federal aid unless and until fraud became so blatant and public that agencies faced political pressure to act, rather than being designed to proactively protect students from predatory institutions.

Corinthian executives faced no criminal prosecution for the systematic fraud they orchestrated. While the company itself faced civil judgments that could not be collected due to bankruptcy, the individuals who designed the fraudulent job placement reporting systems, approved the deceptive marketing, and presided over the predatory recruitment were not held personally accountable. CEO Jack Massimino and other executives retained the millions of dollars in compensation they had extracted from the company during the years of fraud, faced no criminal charges, and moved on to other business ventures or to retirement. The absence of individual criminal accountability sent a message that executives could build for-profit college empires based on systematic fraud, extract personal wealth, then walk away when the companies collapsed, facing at most civil liability that could be discharged in bankruptcy.

The Corinthian collapse also revealed predatory targeting of vulnerable populations. Data showed that Corinthian disproportionately recruited low-income students, first-generation college students, single parents, veterans, and students of color—populations that were often unfamiliar with college processes, desperate for career advancement opportunities, and particularly vulnerable to false promises about job prospects. Corinthian recruiters were trained to identify “pain points” in prospective students’ lives—financial struggles, dissatisfaction with current jobs, family pressures—and to position Corinthian programs as solutions to these problems. This psychological manipulation targeted people’s hopes for better futures and their vulnerabilities rather than providing honest information about program quality, costs, and realistic outcomes.

Veterans were specifically targeted by Corinthian and other for-profit colleges because of a loophole in the “90/10 rule”—a regulation requiring for-profit colleges to obtain at least 10 percent of revenue from sources other than federal Title IV student aid. GI Bill benefits and Department of Defense Tuition Assistance were not counted as Title IV aid under the 90/10 rule as it existed during Corinthian’s operations, meaning that recruiting veterans allowed for-profit colleges to meet the 90/10 requirement while still obtaining 100 percent of revenue from federal sources. This created powerful financial incentives to target veterans with aggressive recruitment, and Corinthian employed numerous former military personnel as recruiters specifically to target active-duty service members and veterans with tactics designed to exploit their trust and their unfamiliarity with civilian education options.

The experience of Corinthian students who completed programs but found their credentials worthless in the job market illustrated the fundamental fraud in the for-profit education model. Many students had done everything “right”—they had worked hard, attended classes, completed assignments, passed exams, and graduated with credentials in fields like medical assisting, dental assisting, criminal justice, or business administration. However, when they sought employment, they discovered that employers did not recognize or value Corinthian credentials, that positions supposedly requiring Corinthian’s programs were either non-existent or were filled by candidates with degrees from community colleges or nonprofit institutions, and that the high placement rates Corinthian had advertised bore no relationship to actual job market outcomes. These students faced the psychological trauma of believing they had failed when in fact they had been systematically defrauded—their inability to find jobs was not due to any deficiency on their part but due to Corinthian’s knowing misrepresentation of the value of its credentials.

The broader impact of the Corinthian collapse on the for-profit education industry was substantial. The company’s failure triggered increased scrutiny of other major for-profit chains, contributed to enrollment declines across the sector as prospective students became more skeptical of for-profit marketing claims, and spurred regulatory actions against other companies engaging in similar fraudulent practices. ITT Technical Institute would close in 2016 following SEC fraud charges and loss of federal aid eligibility. The Art Institutes chain would change hands multiple times before many campuses closed in the Dream Center collapse of 2018-2019. Multiple other for-profit chains would face enforcement actions, lawsuits, and ultimately closures or forced sales as the systematic fraud that characterized the industry became impossible to conceal.

However, the for-profit education industry’s response to the Corinthian collapse was not to reform fraudulent practices but to seek regulatory relief that would allow continued operation without meaningful accountability. The industry invested heavily in lobbying the Trump Administration to repeal Obama-era regulations on borrower defense, gainful employment, and other accountability measures, successfully achieving repeal of most protective regulations between 2017-2020. This regulatory rollback allowed for-profit colleges to continue operating with minimal accountability for job placement claims, student outcomes, or loan repayment rates during the Trump Administration, demonstrating that the lessons of the Corinthian collapse had not translated into durable structural reforms.

The Corinthian case established that major for-profit college chains could operate for decades based on systematic fraud, could enroll hundreds of thousands of students with false promises, could extract billions of dollars in federal student aid, and could ultimately collapse leaving students with worthless credentials and unpayable debt while executives retained personal wealth and faced no criminal accountability. The case demonstrated that civil enforcement and regulatory sanctions, while sometimes eventually imposed, came too late to prevent massive harm and provided inadequate deterrence against future fraud. The seven-year delay between Corinthian’s closure and full loan cancellation for all affected students illustrated that even when fraud was proven beyond doubt, comprehensive relief for victims required sustained political pressure and advocacy rather than being automatic.

The Corinthian debt strike that began in 2015 ultimately succeeded in achieving full loan cancellation in 2022, validating the debt strikers’ courage in challenging a system that demanded they repay debts from fraudulent programs. The success demonstrated that collective action and political advocacy could achieve relief that individual applications and legal processes had failed to provide for years. The debt strikers’ willingness to default, to risk credit damage and collection actions, and to publicly demand justice rather than quietly accepting the burden of fraudulent debt created political pressure that ultimately forced comprehensive relief. Their activism established important precedents both for borrower defense relief and for the broader student debt cancellation movement that emerged in subsequent years.