Orange County-based Corinthian Colleges Inc. said Thursday that it has agreed to sell off 56 campuses for $24 million to a nonprofit entity that collects student loan debt on behalf of the federal government.
The deal between Corinthian and Educational Credit Management Corp., a so-called student loan guaranty agency, represents a large share of Corinthian's campuses. In July, Corinthian agreed to sell off 85 campuses and wind down operations at 12 others as part of a settlement with the U.S. Department of Education.
Corinthian has been in the cross hairs of federal and state authorities over the last year amid allegations that the company falsified student job-placement rates and misled prospective students by persuading them to take on too much debt. The Department of Education temporarily suspended the company's access to federal student aid in June, which brought the company to the brink of collapse.
While Corinthian, under the July agreement, had agreed to sell off the vast majority of its schools in exchange for temporary cash transfers, the company had not announced any sales until Thursday.
The deal is contingent on approval by the Education Department and other regulatory agencies.
Education Department undersecretary Ted Mitchell said the agency supported the sale of the Corinthian schools.
"Thousands of students can now rest assured that they will be able to pursue their education and have more stability in the midst of this school year," Mitchell said in a statement. "We are pleased to help students transition from a problematic for-profit company to a nonprofit that is committed to giving students a new start and more opportunities for success."
Most of the money in the $24-million deal will not go to Corinthian. Of the total, $12 million will go to the Department of Education, $8.5 million will be placed in escrow to handle any outstanding liabilities and the remainder would go to Corinthian.
The deal involves 56 Everest College and WyoTech campuses in 17 states. ECMC Group, the nonprofit that will take on the Corinthian schools, also agreed to acquire 12 schools that will wind down operations once current students graduate.
Santa Ana-based Corinthian will still own 12 Heald College campuses, 13 Everest and WyoTech campuses in California and 14 Everest campuses in Ontario, Canada, which together serve about 20,000 students. Corinthian said it was still seeking buyers for those campuses.
David Hawn, president and chief executive of ECMC Group, said the nonprofit would work to reduce tuition and improve job placement at the schools.
In an interview, he said ECMC will bring on a new management team to operate the schools and shift the focus away from maximizing student enrollments for revenue growth.
"It really is not about how many students we enroll, but how many students complete their programs," Hawn said. "It's a very, very different approach to the way career education is delivered."
Hawn said ECMC chose not to purchase the Everest and WyoTech schools in California because of concerns about legal liability stemming from a pending case against Corinthian by California Atty. Gen.
"After a number of discussions with the California attorney general's office, we felt it was best to leave those campuses behind," he said.
Jack Massimino, Corinthian's chief executive, said in a statement that students would benefit from ECMC's "goal of making a positive difference in career education."