WASHINGTON -- Troops should think twice before enrolling in one of the country's largest for-profit university chains as it faces the government-supervised sale of its campuses and charges it preyed on the military, Sen. Dick Durbin, D-Ill., warned Monday.
Corinthian Colleges is being forced by the U.S. Department of Education to sell off 85 nationwide subsidiary campuses, including WyoTech college locations popular with servicemembers. Its other 12 campuses are slated to close.
Durbin said the career colleges have been aggressively recruiting servicemembers and spouses who use military tuition assistance. Last week, the Senate gave some support to his proposal to rein in hundreds of millions of dollars in federal funding flowing to the companies via tuition assistance.
"Before signing up for class and student debt, every student should know Corinthian schools are going out of business," Durbin said in a released statement Monday. "While my bill would bring much needed long-term reform to the for-profit college industry, it can't prevent students from enrolling in a failed for-profit college tomorrow."
Career colleges such as those run by Corinthian are prohibited by law from getting more than 90 percent of revenue from the federal government. But tuition payments made through the new 9/11 GI Bill, military tuition assistance, and MyCAA funding for spouses are not counted toward the legal limit on federal aid, according to Durbin's office.
The Senate version of next year's defense spending bill, which passed committee last week, would close the loophole by requiring all military-related tuition assistance to be counted toward the federal cap.
Corinthian Colleges thrust regulatory concerns into the national spotlight last year when it disclosed a probe by the U.S. Securities and Exchange Commission that sent stock prices tumbling.
In June, the Department of Education froze federal payments to the company, citing claims of falsified job placement data as well as grades and attendance tampering.
The California attorney general is also suing Corinthian Colleges and its subsidiaries WyoTech, Everest and Heald colleges for "deceptive and false advertisements" and allegedly lying to investors about how many graduates found employment.
Corinthian Colleges targeted veterans returning from combat and internal company documents described its core demographic as isolated individuals with low self-esteem, who have few people who care for them and are worried about the future, according to the attorney general.
The state also claims that federal funds "account for almost all" of the company's annual revenue.
Corinthian Colleges spokesman Kent Jenkins said it denies allegations it used predatory tactics or misleading marketing.
He said about 80 percent of the company's budget comes from the federal government, while about 7 percent of students originate from the military.
"We take very strong issue with many of the things asserted in the California attorney general's suit," he said. "We are contesting that suit vigorously and we think the suit lacks merit."
The company signed an agreement with the Department of Education this month on relinquishing its campuses that is aimed at allowing about 72,000 students to continue schooling and complete their educations even if new owners take over, according to a copy published by the SEC.
Jenkins said all campuses at WyoTech, a college that focuses on automotive trades and attracts most of the company's military students, and Heald are planned to remain open while Corinthian searches out buyers. The Everest campuses are slated to close.
Instruction "has been uninterrupted and it will be uninterrupted," Jenkins said. "All students are getting a disclosure. They understand these campuses are up for sale."