Corinthian Colleges and ECMC Group, Inc., closed a deal to sell most of Corinthian's campuses to ECMC, a student loan debt collector. The sale brings mixed news for students: $480 million to forgive private student loan debts and the elimination of a troubling mandatory arbitration policy – but ECMC may ban class action lawsuits, and many federal loan borrowers get no relief.
CRL senior policy analyst Maura Dundon remarked on the sale:
The sale of most of Corinthian Colleges' campuses to ECMC closes one chapter in the troubled history of the for-profit college, but it is still unclear what the future holds for students.
The final terms of the sale offer some improvements over the version initially announced last fall. The deal forgives $480 million of private student loan debt, and the new school has also agreed to eliminate mandatory arbitration - which would have required students to give up their right to go to court as a condition of their enrollment. Some students will also have the opportunity to receive refunds. The Consumer Financial Protection Bureau and the Department of Education deserve praise for these improvements in consumer protections.
But despite these promising changes, the deal could still leave vulnerable students in a lurch. ECMC will reportedly be permitted to ban class actions by students with claims against the school, which could significantly hinder borrowers' rights in court. The school may also still enforce mandatory arbitration against whistleblowing employees. This could keep information about violations from reaching regulators and the public. Students will still be burdened by federal student loan debt that would have been erased had Corinthian been permitted to fail.
By converting to a non-profit, ECMC has ensured that the new school will escape some of the regulatory controls placed on for-profit colleges, although it says it will voluntarily comply with the gainful employment regulations. But ECMC will still target the same lower-income students with expensive career education programs of uncertain value on the job market. ECMC students may end up stuck in the same situation as Corinthian students: high debt and high defaults, and not enough graduates with jobs paying enough to justify the loans.
Going forward, the Department of Education and other regulators must ensure that ECMC fulfills its obligation to effectively prepare students for gainful employment.
In November 2014, the Department of Education announced that ECMC Group, Inc. would purchase many Corinthian College campuses. The sale triggered intense concern among student, education, consumer, and civil rights groups, who feared that the transition from a for-profit college to a non-profit college provided few protections to students, while allowing the school to escape regulatory scrutiny.
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