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Monitor raises questions about successor to Corinthian Colleges

Everest Institute in Silver Spring was one of the campuses of the now-defunct Corinthian Colleges. (Jose Luis Magana/AP)
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A new report casts doubts on Zenith Education Group’s efforts to make successful nonprofit schools out of dozens of campuses formerly owned by Corinthian Colleges, a defunct for-profit chain.

The independent monitor overseeing the transition, Clark Kent Ervin of the law firm Squire Patton Boggs, released his final progress report this week detailing instances of misleading recruiting and advertising practices — charges that Zenith disputes. Ervin’s findings, some of which mirror his previous reports, suggest Zenith is employing tactics similar to those that got Corinthian in trouble.

New monitor finds trouble signs at former Corinthian campuses

Federal and state authorities had accused Corinthian, which ran WyoTech and Everest and Heald colleges, of pressuring students into enrolling with unrealistic promises of employment and deceptive information about financial aid. Ervin reviewed a sample of recruiting calls to students and said he found admissions representatives at Zenith stretching the truth.

One Zenith recruiter allegedly told a prospective student that a job upon graduation is virtually guaranteed, according to the report. Another representative is accused of providing an applicant answers to an admissions test, while yet another encouraged a prospective student to lie about misdemeanor convictions on her application.

Ervin said he also found instances of employees encouraging each other to have applicants falsify information. In one call, a recruiter allegedly told a financial aid officer that a prospective student earning $225,000 should report lower income to qualify for financial aid, according to the report. The monitor also chided Zenith for failing to implement any of the recommendations he provided in earlier reports, and ignoring his requests for campus visits.

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Zenith refutes Ervin’s characterization of the calls, and notes that out of 1,609 exchanges reviewed for this period, the monitor identified only nine that he found concerning. In a statement to The Washington Post, the company also takes issue with Ervin’s insistence that Zenith’s website does not prominently display graduate debt-to-earnings data as required by the federal gainful employment rule. Zenith argues that the issue is null and void because the U.S. Department of Education has delayed full implementation of the rule.

“We are concerned that the monitor’s most recent report contains several apparent misunderstandings and, in some cases, misstatements of Zenith’s business practices and regulatory requirements,” the company said. “We are proud of the activities we undertook at the acquired campuses over the past three years.”

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It has been nearly four years since ECMC Group, a student debt collector, acquired 56 Corinthian campuses and created Zenith to run them. The schools were on the brink of closure after the Education Department cut off Corinthian’s access to federal student aid after the company falsified graduation and job placement records. The $24 million sale drew criticism from consumer advocates and liberal lawmakers who questioned whether the deal was in the best interest of students.

At the time, the Obama administration said the sale prevented thousands of students from being displaced and having their education disrupted. Zenith estimates it saved taxpayers $435 million in potential federal student loan forgiveness that would have occurred had the schools closed. The company also forgave $480 million in private student debt held by Corinthian students.

In all, Zenith said it has spent more than $500 million to try to turn the campuses around. Zenith instituted a series of reforms to improve the quality of education, cut tuition by 20 percent and eliminated the poorest performing programs. But the schools have still struggled to stay afloat.

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In November, Zenith said it would close all but three of the campuses, citing “low student enrollment, unacceptable student outcomes . . . changes in market demand.” Students are being allowed to complete their courses before the schools cease operation — what’s known as a “teach-out.”

“Given the foregoing concerns and those expressed in previous reports . . . it would be in the best interest of students if there were some independent review of the teach-out of the schools being closed,” Ervin wrote in his final report. “Given the inevitable cost pressures and the fact that these schools will be ceasing operations in the not too distant future, there will doubtless be a temptation to cut corners as the closing dates near.”

The monitor also said he wonders “whether the few Zenith schools that will remain will fare significantly better than the many that are being closed” considering the sizable investment the company has already made.

Asked whether Zenith regrets the purchase of Corinthian’s floundering campuses, the company said, “Given the great deal of good done as a result of this acquisition, we would absolutely do this again. We are doubling down on our focus on the most effective initiatives and innovative ideas that provide underserved students with the best opportunities for career success.”

Zenith said it is proud of the more than 15,000 students who have graduated since the acquisition and 73.2 percent success rate it has achieved in placing those students in jobs in their fields.

“The monitor’s report raises some not-so-subtle questions about the long-term viability of the Zenith schools, which makes one wonder what the schools’ accreditor and the Department of Education are doing to keep track of the situation,” said Ben Miller, senior director for postsecondary education at the left-leaning Center for American Progress. “It’s hard to look at the continued situation with the Zenith schools and not wonder if an independently managed wind-down of all the Corinthian schools would have been a better outcome for students and taxpayers.”

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