January 23, 2015

Inside the ECMC-Corinthian Deal: Will Students Be Protected?


The U.S. Department of Education’s ill-advised effort to broker the sale of 56 campuses of the discredited Corinthian for-profit college chain to ECMC, a student debt collection operation, has hit some snags. The transfer of campuses to ECMC has been delayed nearly a month, to February 2, in part because various state regulators need to give approval, and even then there will be campuses not ready to be shifted until some unspecified later time. But new information obtained by Republic Report suggests once again how challenging it would be to successfully run Corinthian for any new management, and particularly ECMC, which has no prior experience operating a college. The information also indicates that the Department of Education needs to be vigilant to ensure that a key student protection provision touted by the Department in the agreement — which would give students in failing Corinthian programs options to obtain refunds or transfer to other programs — is not implemented in a way that actually denies students a meaningful choice.

The circumstances call into question the wisdom of the U.S. Department of Education committing billions more in taxpayer funds to keep afloat a giant career college that has ripped off countless students, deceived government regulators to keep a flow of as much as $1.4 billion a year in taxpayer money, and somehow still managed to end up on the edge of bankruptcy. Corinthian is now under investigation by at least 23 state attorneys general and multiple federal agencies. (This writer is also an advocate who is working actively with a coalition of organizations to try to prevent the sale as presently structured.)

In early January, some Corinthian managers briefed a large number of staff members on how they should engage students on the implementation of the so-called Student Choice provisions of the still-in-draft Corinthian-ECMC deal — the provisions that are supposed to give most Corinthian students real options regarding their future: refunds, transfer to other programs within Corinthian, transfer to other colleges.

Under the proposed terms of the agreement, responsibility for implementing the Student Choice program belongs to Zenith, the new ECMC division that would run the college. But faced with questions about the appropriateness and timing of this Student Choice plan rollout, Corinthian and ECMC sources offered me shifting explanations of who was responsible for devising the plan, the degree of ECMC control over the process, and the authorship of scripts for staff to use with students. (See the scripts here: 1, 2, 3.)

A Corinthian employee provided the materials and information to Republic Report in the first full week of January. This employee, who asked not to be identified out of concern for their job, expressed concern that the school appeared to be ready to implement the Student Choice provision in a way that would, in fact, deprive many students of a real choice. The employee was concerned that students would have only seven days to respond from the time they were notified, or 29 days without effective notification, and that the school’s website was often down and phone lines were jammed for hours. The employee said students would not be able to access the paperwork on most mobile phones or tablets, even though management was well aware that many students used those devices and had no personal computer access. There were no plans to upgrade capacities to deal with the volume of communications, or for extensions in the event of service delays.  The employee also stated that once a student clicked their choice through a web form and hit submit, it could not be corrected, even if they accidentally clicked the wrong box.

All of these problems underscored the biggest problem of all: Under the plan, students who failed to respond within the limited time frame would automatically remain enrolled in the new Zenith school with all their student loan debt intact.

ECMC sources have insisted to me that the final version of the plan will give students meaningful notice and choice, but they declined to disavow the use of automatic re-enrollment as the default response for students who don’t respond.

The Corinthian employee concluded that because the new plan was insufficiently robust to achieve real student choice, it was “unethical.” Believing that ECMC has crafted the plan, this employee concluded that ECMC, like Corinthian before it, was mostly focused on banking revenues from student loan checks, and not on meeting genuine student needs. “ECMC is a student loan collection company,” the employee said. “They know how hard it is to contact students.”

Asked about who was responsible for the Student Choice plan and documents briefed to employees, an ECMC spokesperson would tell me on the record only that “ECMC Group is moving full steam ahead, coordinating with future Zenith employees on campus matters as appropriate. While we are pleased with this progress, the enormity of the transaction means that we continue to work to finalize details of a number of programs for both students and Zenith employees, including the Student Choice initiative. We will have more details to share upon closing.”

Corinthian spokesman Kent Jenkins told me, “Dave Hawn, ECMC’s CEO, has clearly communicated the main goal of the Student Choice program to Corinthian school managers: students currently enrolled in programs falling below accreditation standards for placement will be given an opportunity to make an independent decision regarding their continued enrollment. In preparation for the close of the transaction, ECMC and Corinthian are developing procedures and materials that will be used to implement Student Choice. The materials are still in draft form; ECMC will have the final say on when they are complete and ready for distribution. The materials have not been circulated to any of Corinthian’s campuses, although some of the draft materials were provided to online personnel.”

In addition to ensuring a strong student choice provision, the Department of Education should be acting to protect students by demanding that ECMC drop another controversial provision of the sale agreement — one that would require Zenith students to give up their rights to go to court over disputes with the school, whether over deceptive marketing, campus safety, or other matters, and instead complain to a privately-hired arbitrator. Such mandatory arbitration clauses tend to favor the institution over the individual, especially because the private arbitrators depend on institutions to keep hiring them. These clauses are regularly used by predatory for-profit colleges to deny students their rights, but they are almost never used by the non-profit college world, which ECMC/Zenith would supposedly be joining. So if the Department blessed the mandatory arbitration provision, it would set a dangerous precedent.

Senator Dick Durbin, our coalition of civil rights, veterans, student, and consumer organizations, and now the Fair Arbitration Coalition all have spoken out against the mandatory arbitration requirement in the ECMC-Corinthian deal. ECMC had been insistent about keeping the provision, but ECMC sources are now saying that no final determination has been made.

If ECMC, whose Washington lobbyists now include The Podesta Group and former GOP congressman Vin Weber, truly wants to help students, it needs to show that by implementing this agreement in a way that upholds student options and rights. And if the Department of Education is to meet its obligations to protect students, it must insist on meaningful safeguards for students in this accord — especially because future collapses of big for-profit colleges may be on the horizon.


There are other signs of confusion in the ECMC-Corinthian transition.  Last November 20, the day ECMC announced its plan to purchase the Corinthian campuses, ECMC CEO Hawn sent a letter to Corinthian employees that included, in bold type, this pronouncement: “we plan to offer employment to substantially all of you.” Six days later, Hawn sent a follow-up email to staff suggesting a change of course: “I want to assure you that we anticipate very little change occurring at the campus level…. We also began discussions around key positions above the campus level and across the Campus Support Centers. By the end of next week, we will determine staffing needs and identify those positions that will transfer to ECMC. We intend to communicate to you with certainty by extending offer letters by mid-December.”  He concluded by wishing the employees a happy Thanksgiving.  Then, a few days before Christmas, managers at the Corinthian Colorado Springs support center told employees that the center would be closing.

Corinthian’s Kent Jenkins told me, “ECMC has said that it will hire new senior executive leadership to oversee the campuses and online programs that it is purchasing from Corinthian, but that it will retain the majority of line personnel and middle managers who administer these programs. Thousands of Corinthian employees are expected to join ECMC.  Corinthian announced in mid-December that a call center in Colorado Springs, Colorado which employs about 200 people will close effective February 28 and that operations there will be consolidated into two other call centers located in Thornton, Colorado and Tampa, Florida. Zenith has plans to hire additional personnel in both locations.”

This article also appears on Huffington Post.