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Washi?gi??e; DC: 20-32-202



With-IEEard'to-the pmp?aed sat-133G? the BEIHPUS iB'ii'airSY?'l?s Mia's Part
pff?iease?lem?nt gang-m company C'?ri?thian College. Thaw-m-cu?en?? We: 
'Whieh provides training?n 
.

understand that'the curt?ntj-agmemcnt statesmat mgr-i11-  md'se?ll?the-

- Wy?Tech'campuges 10. .m'the?r' academia Entity. As- any potential?alebcgins toe tak?hap?e?, I.
 ha Slim-thank; na?ds' and of students full-ygpr?s?r-ve?. this
procassmwes forward,,l respectfully risquest answers to the 

Haw Kong daea ?o'rin?iia'n 001133;: have to compi?teathe sale anyqTech? 

i'fm35 3933mm! ?mm? does?me De?me far
Wanech?? I

limit steps 'ih =the-event'tha't art-buys: ?rth: WyuTgch cam-pus mm besf?md?
HOW are-?atnpuses that have bean IiSted for-salearequired tn handfa'the cum?mant of?ew
Student-'3? Will 11163? be Subja?t Id as campuses. designated fair;
clusure?? 

.- orlupdated 011.111.: til-their

.  result: 

I lift-his campus 15' pmchasgdi. and the new. name: dhaoses to chase- Charmin
Pto'??i?s?but mama the-Wan}: sainpus; what man. rsi-ief- the: Department provide;
affected student's? 

 yen far wartime and considarationgif yam have_--any q?es?ti'on's cancer-11's;  
:to-zemifact' Jared $919an on mar?Estaff at. (32-02} 228?6333..

Sincer?ly,-

Robert-P; Casey, Jr.
Salas Senator

 

WME 

 

 

.- ti :23 I. . 

 

.luly18,2t}14

Mrs. Jill M. Cochran
(bl(7(Cl

 

 

 

 

Dear Mrs. Cochran:

Congressman lid Whit?eld forwarded to the US. Department of Education {Department} your
June 2014. message regarding Corinthian Colleges. Inc. {Corinthian} and the funding
restrictions imposed by the Department due to concerns about Corinthians compliance with
program requirements. As you may now be aware. the Department has subsequently developed
an arrangement with Corinthian that has enabled the company to continue many of its
educational programs under an Operating Agreement.

Our foremost interest is to protect students and make sure they are educated by institutions that
operate in accordance with our standards. We made the decision to increase ot'ersight of
Corinthian only after careful consideration. and as part of our obligations to protect students and
taxpayers.

At the same time, we are sensitive to the concerns of the thousands of students already attending
Corinthian-owned campuses. The Operating Agreement requires Corinthian to sell its schools or
?teach out" its programs over the coating months, while additional student and taxpayer
protections are in place.

We believe our approach regarding Corinthian soundly balances the interests ot?current students.
potential students. and taxpayers who entrust the Department to be judicious stewards ot?the

 .4 billion in Federal ?nancial aid money that has been provided annually to Corinthian. 'l?hanlt
you again for sharing your concerns.

Sincerely.
1   
9- 13 -

'l?ett Mitchell

cc: Honorable Ed 1t?t'ltitiicld

 tie-tans goats

WASHINGTON. oc 2051a

June 2-5, 2-0214

Hon Grams-Ame, Doncan
Sec-rotary

e'paittment' of Education
4.05'Maryland Avenue, SW
Washi-ngien, DC 20202

Dear-{S ecretary- Duncan:

4&5 the Departinth of Education continues-its important oversight of Corinthian Colleges
Incarcerated, we write-to ensure that the-Departmentdoe?s everything it canto protect students-
who ass-result ofrthe'impending saleor closure of Gennthian campuses
nationnade. Own-the past severalyeats-wehane seen multiple. examples. of abrupt school
ei'ostufes: that -]1ave..left students scrambling to continue-their education or. discharge
their leans. Corinthian Colleges Incorporated represents "a risk:th students on a scale that could.
overwhelm the current system cf support 'andfsa'feiy notiprnnisions for students;

Corinthian has shown-itself to-bezone-of the worst actors in the fer?pro?t coilege?intiusny
under image-gases by famsadaitienali federal agencies and more -'tli'an 20 State-Attorneys
Ii: isiimportant'that the Department continue to hold Chrinthian accountable for its
must be held responsible fer-the bad actions of'this- company. As
such, titre-urge the Department to:

Inmmdisteely-prohibit enrolling any. new students.

9 Require Corinthian :io- fully inform students of the company?s intentions related to the
sale or'elos'u-re cf specific catnpuses.

at .P-toihibit'any for-pro?t-cotnpanyer school that federalpr state investigation
from purchasing: in 'teacheout'zpnocesses ef'any Corinthian campuses.

.1 a condition ef'ire'ceiving continued federal-3 funding, that Corinthian ceniify
thatiit seek to .enforcre mandatory arbitration clauses that preclude students
who have been harmed by Corinthians misconductfrem. seeking relief in the. forum
(if-the stu?enisi? and prohibit-any entity that the-Department- permits to
purchase a Cesinthian school. er carry. nut-'a- teach?out,_ plan from-including such
clauses in their enrolintent-agreementst.

we request engineers-to the 

a When will Cerinthian; Ceiieges designate which campuses it intends to sell and which
williel'ese?

 

 

 

'0 Do students at closing campuses have the emigrate-refuge a planned teach-eout-and
instead seek Closed-School Discharge? If the Department ensure
students are properly noti?ed.- of their, options?

0 What process exists herre'wers-whe- de not qualify fer the Clese'd School
'Di'seh'argezte bring?claims: 10 the Department'thatthe school?s potential'vinlatiens of
the law are a defense to repayment?" Will? indiVidual bermwers-Ihavc to brinsgseplatste
aet'iens for-such an omen-er 'al'l borrewerssubjeeted to the same impropriei-ies: be
granted relief? to ailborr?ewers regardless of payment 
Status?

if a. Corinthian school is purchasedand the new awner eleses. programs, but maintains
the eampu's, whatrel'ief will the Department previtie or require to be provided to the se
stutientsh'.J

I Haw: will students enline?only programs be dealt with?

.o Haw-will thesDepartmejnt seek-to ensure relief for Corinthian students with private
studhnt' lean debt?

We request a prempt response "t9 ea'eh- {if these requeSIed. actions antiquestion's'. Thank

yen for your. Work to shield 'Weeneourage'ytiu te
continue ean'dueting-r-aggtessive aversi'ght-lethis= i'nd'ustly.

Sincerely,-

 
 
 
 

    

   

.Rieharti-i. iD'urhi-n I
 States- Shit 

 

Toni Harkin
United-States Senator

. I
United: Stems Senator United States Senator-

  
  

 

 

 

  
 
 

 
  
 

 

=icl. I 
.Iett'ijtates Senator

 
 

 .Nelsgn I    If
United Statee Senator United States Senater

 

 

   

 

 

'Bfi?nf Schatz
United Staies Senator

Unit-3d Statds? San?to'r

 
 

 

cc: The ?ammable Ted Mitchell, .Undersecmtary

   

-  Mini?13113?" .
United States Senator

  



 

 

 

Mayes, Edgar

From:

Sent:

To:

Cc:

Subject:
Attachments:

Edgar 

 

Stanek, Taylor

Wednesday, June 25, 2014 6:11 PM

Mayes, Edgar

Catoe, Tracy; Tesoriero, Vanessa; Coley, Jerine; Thomas, Jennifer
FW: Senate letter to Sec. Duncan and US Mitchell

6.25.14 Senate Letter to Duncanpdf

Attached please find a letter to Sec. Duncan from Sen. Durbin and others regarding the ongoing situation with Corinthian
Colleges, Inc. Copying others as an FYI. Please control in CCM, and let me know if you need anything else from OLGA

at the moment.
Than ks i

-T

 

 

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Richard J. Durbin
United States Senate
Washington, DC 20510

Dear Senator Durbin:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The U.S. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

I am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances

remain quite ?uid and will continue to evolve. As a result, we will continue to review our plans
and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Cerinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their options and the
status of their respective institutions. In particular, and with respect to your speci?c questions:

a As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close a?cr providing students who are already enrolled with
time to complete their educational programs (?teach-out? institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

I Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014?the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the re?lnd applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
re gardin the option they may pursue.

Students who enrolled on or after June 23, 2014, and before July 8, 2014, have the
option to choose to I) continue and complete their educational program or (2)
withdraw and obtain a full refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students

at those institutionsnitplans to sell information @gardipgthenstatus of the  I

institutions and the options and protections afforded to those students. In addition to
speci?c disclosures drafted for use for students at teach-out institutions discussed above,
the Department has dra?ed disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further
informs proSpective students that if a school is sold, any new owner might make changes
to their educational pro gram, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the Operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain

. Corinthian institutions are ineligible for recerti?cation to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to 1) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans Within the refunds that the company provides to students. In particular, we de?ned
cases_to include repayi ng pny private student loan or debt to anv other lender 
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School cloSures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States? responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by?case basis. In the end,
however, the Department?s concerns and interests are the concems and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andlor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

assailants class strait-stars; artisans] a judgment against a 
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain ajudgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher dc Flom LLP dc Af?liates, under the leadership of former US.
Attorney Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

MW.

Ame Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Tom Harkin
United States Senate
Washington, DC 20510

Dear Mr. Chairman:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The U.S. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

I am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite ?uid and will continue to evolve. As a result, we will continue to review _o_1ir__ plays



aEE'co'ii?h'umg are: all we can" to protect both
students? and taXpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their options and the
status of their respective institutions. In particular, and with respect to your speci?c questions:

- As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close after providing students who are already enrolled with
time to complete their educational programs (?teach-ou institutions}. Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

- Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014?the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full re?md
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
re?md of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian re?md will have the re?md applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or a?er June 23, 2014, and before July 8, 2014, have the
option to choose to (1) continue and complete their educational program or (2)
withdraw and obtain a full re?md of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a ?ll] re?md. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian re?md will have the re?ind applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students

institutions and the options and protections afforded to those students. In addition to
speci?c disclosures dra?ed for use for students at teach-out institutions discussed above,
the Department has dra?ed disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students1 ability to complete their educational programs. The disclosure further
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Departurent to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recerti?cation to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the re?md Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may quali?y for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we de?ned-
 
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any .
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online?only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States? responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case?by-case basis. In the end,
however, the Department?s concerns and interests are the concems and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is etu'rently under State andfor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain ajudgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain a judgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP 3: Af?liates, under the leadership of former US.
Attomey Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 

Sincerely,

MW

Ame Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Barbara Boxer
United States Senate
Washington, DC 20510

Dear Madam Chairman:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The U.S. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

1 am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corpmate entity is unprecedented; and that circumstances

resistaauits?sis and will sontinue__t9sr9_1rs_-_ maresle as nill continue to 

and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their options and the
status of their respective institutions. In particular, and with respect to your speci?c questions:

I As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close a?er providing students who are already enrolled with
time to complete their educational programs (?teach-out? institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014-the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (I) continue
and complete their educational program or (2) withdraw and obtain a ?ll refund
of all tuition and other fees paid for their pmgram. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or after June 23. 2014, and before July 8, 2014, have the
option to choose to (1) continue and complete their educational program or (2)
withdraw and obtain a full refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students
inches; institutions it plans to .. .
institutions and the options and protections afforded to those students. In addition to
speci?c disclosures drafted for use for students at teach-out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure ?lIthBI'
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andr?or grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corintlrian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with reSpect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Cerinthian institutions are ineligible for recertitication to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we de?ned
to.__i_r1sl_uds. .
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating A greernent makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
Ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States? reSponsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case?by-case basis. In the end,
however, the Department?s concerns and interests are the concerns and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andz'or Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to mpayment, but the borrower is not required to
sue or obtain a judgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP Af?liates, under the leadership of former U.S.
Attorney Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
confident that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 401?0020.

Sincerely,

09W.

Ame Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Sherrod Brown
United States Senate
Washington, DC 20510

Dear Senator Brown:

Thank you for your letter of une 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The US. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the dismption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

I am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite ?uid and will continue to evolve. As a to reviewourplans
midpmcessesgoi?g'forward'to "ensurethat we are "continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their options and the
status of their respective institutions. In particular, and with respect to your specific questions:

a As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close a?er providing students who are already enrolled with
time to complete their educational programs (?teach-out? institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

I Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014?the date the Department placed
Corinthian on heightened ?nancial oversight-will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or after June 23, 2014, and before July 3, 2014, have the
option to choose to (I) continue and complete their educational program or (2)
withdraw and obtain a full refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students

. .

institutions and the options and protections afforded to those students. In addition to
speci?c disclosures drafted for use for students at teach?out institutions diseussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they cam at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental financial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recerti?cation to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we de?ned
re?indsinsuchcasesto  anyotherlender
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is with0ut
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State mayr require, given that the does
not generally preempt State law or override States? responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by-case basis. In the end,
however, the Departrnent's concerns and interests are the concerns and interests of students and
taxpayers, and the Departurent will strive to ensure their welfare in the subsequent closure and
sale of Corinthian's institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain ajudgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain a judgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP 3r. Af?liates, under the leadership of fonner U.S.
Attorney Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

09W

Ame Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Jack Reed
United States Senate
Washington, DC 20510

Dear Senator Reed:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The US Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

I am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the Opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that 
 ?tnd.and._vsilleontinue toevnlve. As a res111t,we will continue. to review our plans.
and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid

pro grams ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their options and the
status of their respective institutions. In particular, and with respect to your speci?c questions:

I As of July 9, 20l4, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close after providing students who are already enrolled with
time to complete their educational programs (?teach-out? institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Co?nthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

0 Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014?the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or after June 23, 2014, and before July 8, 2014, have the
option to choose to (1) continue and complete their educational program or (2)
withdraw and obtain a full refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students
enrolledatthose institutionsit plans to sellinfonnationregardingthe status ofthe.
institutions and the options and protections afforded to those students. In addition to
specific disclosures drafted for use for students at teach?out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further .
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with re'spect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recertification to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to cominue and complete their educational program
in accordance with regulations that govem school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full re?Jnd of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we defined
refunds. in Such cases private. student loan or debt to ear 
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States? responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by-case basis. In the end,
however, the Department?s concerns and interests are the concerns and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closnre and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With reSpect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain a judgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher 85 10111 LLP Af?liates, under the leadership of former U.S.
Attomey Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwieh, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

MW.

Arne Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Elizabeth Warren
United States Senate
Washington, DC 20510

Dear Senator Warren:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The US Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and. educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

I am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite ?uid and will continue to evolve. As a result, we will continue to review our plans
and'processe's going forward?to ensure that we are-continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students conceming their options and the
status of their respective institutions. In particular, and with respect to your specific questions:

I: As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close after providing students who are already enrolled with
time to complete their educational programs (?teach-out" institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

I Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 20l4?the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or a?er June 23, 2014, and before July 3, 2014, have the
option to choose to (1) continue and complete their educational program or (2)
withdraw and obtain a full refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students
information regardingthestatnsof the.
institutions and the options and protections afforded to those students. In addition to
speci?c disclosures drafted for use for students at teach-out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further
informs proSpective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatOry requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental financial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recertification to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govem school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and qualifications pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the re?rnds that the company provides to students. In particular, we de?ned
re?ands in such-cases toincluderepaymganypriaate studentloan or debt to any. other lender
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly notified of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its 
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States? resmnsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by-case basis. In the end,
however, the Department?s concems and interests are the conce ms and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to rcpayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain a judgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP 85 Af?liates, under the leadership of former US.
Attomey Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Office of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

MW.

Ame Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Bill Nelson
United States Senate
Washington, DC 20510

Dear Senator Nelson:

Thank you for your letter of June 25, 20l4, concerning Corinthian Colleges, Inc. (Corinthian).
The U.S. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

1 am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the Opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scepe of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite ?uidancl. will continue to evolve. As aresult, we will continue to review our plans
and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their cptions and the
status of their respective institutions. In particular, and with respect to your speci?c questions:

0 As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close a?er providing students who are already enrolled with
time to complete their educational programs (?teach-out? institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

0 Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2



0 Students who enrolled prior to June 23, 20l4?the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a ?rll refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian's decision
regarding the option they may pursue.

Students who enrolled on or after June 23, 2014, and before July 8, 20l4, have the
option to choose to (1) continue and complete their educational program or (2)
withdraw and obtain a ?rll refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students
enrolled at those. institutions it situate. sell infonnation. regardingthe status of the
institutions and the options and protections afforded to those students. In addition to
Specific disclosures dra?ed for use for students at teach-out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in ?rture enforcement actions that might negatively
affect students? ability to complete their edtIcational programs. The disclosure further
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are ?rlly aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions beeause it had admitted to falsifying placement rates andior grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recerti?cation to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we de?ned
such cases. toinsluds repaying. any. loan ardebtto any other lender
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the REA does
not generally preempt State law or override States? responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by?case basis. In the end,
however, the Department?s concerns and interests are the concerns and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
qualifications established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain a judgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP Affiliates, under the leadership of former US.
Attorney Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
confident that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Office of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

(LL

Arne Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Richard Blumenthal
United States Senate
Washington, DC 20510

Dear Senator Blumenthal:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The U.S. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

I am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite ?uid and will continue to evolve. As a result, we will continue. to review our plans
and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthiau?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For exarnple, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their options and the
status of their respective institutions. In particular, and with respect to your specific questions:

0 As of July 9, 2014, Corinthian has identified those institutions it plans to sell, as well as
those institutions it plans to close u?er providing students who are already enrolled with
time to complete their educational programs (?teach?on institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational pro gram at such other institution.

I Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014?the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full re?md
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this Option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian re?md will have the re?md applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

0 Students who enrolled on or after June 23, 2014, and before July 8, 2014, have the
option to choose to continue and complete their educational program or (2)
withdraw and obtain a full re?md of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full re?md. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian re?md will have the re?md applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

a Under the Operating Agreement, Corinthian is also required to disclose to students
emolledat thoseinstitutions-it plans to sell information regarding. the status of the
institutions and the options and protections afforded to those students. In addition to
speci?c disclosures drafted for use for students at teach-out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recerti?cation to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the reftmd Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the re?tnds that the company provides to students. In particular, we de?ned
refunds in suchcascs to include repayingany  student loan or debt to any other lender
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in onlineuonly
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
pro gram changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
howr the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular cOndition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States? responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by-case basis. In the end,
however, the Department?s concems and interests are the concerns and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain a judgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a bon'ower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP Af?liates, under the leadership of former US.
Attomey Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

MW

Arne Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 20202

 

August 4, 2014

Brian Schatz
United States Senate
Washington, DC 20510

Dear Senator Schatz:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The US. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of COrinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

1 am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govem the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite fluid and will continue to evolve. As a result, we will continue to review our plans
and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students conceming their options and the
status of their reSpective institutions. In particular, and with respect to your speci?c questions:

In As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close a?er providing students who are already enrolled with
time to complete their educational programs (?teach-out" institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

- Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to one 23, 2014?the date the Departurent placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closedschool loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or after June 23, 2014, and before July 8, 2014, have the
option to choose to (1) continue and complete their educational program or (2)
withdraw and obtain a ?rll refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students
enrolledatthose institutionsitplansto sell information regardingthe status ofthe
institutions and the options and protections afforded to those students. In addition to
speci?c disclosures drafted for use for students at teach-out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in ?iture enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian's
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recerti?cation to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (I) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we de?ned
refunds in such cases to include repaying any private student loan or debt to any other lender
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the reSUlt of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States' responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by-case basis. In the end,
however, the Department?s concerns and interests are the concems and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain ajudgment against the school in Order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP Affiliates, under the leadership of former US.
Attomey Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Of?ce of Legislaticm and
Congressional Affairs, at (202) 401-0020.

Sincerely,

MW

Arne Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, DC 2o2o2

 

August 4, 2014

Christopher Murphy
United States Senate
Washington, DC 20510

Dear Senator Murphy:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The U.S. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended and
our regulations.

1 am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite ?uid and will continue to evolve. As a result, we will continue to review our plans
and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain circumstances
described below, and will make disclosures to affected students concerning their options and the
status of their respective institutions. In particular, and with respect to your speci?c questions:

Iv As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close after providing students who are already enrolled with
time to complete their educational programs (?teach-out? institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisr'her educational program at such other institution.

0 Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014?the date the Department placed
Corinthian on heightened ?nancial oversi t?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a hill refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or after June 23, 2014, and before July 8, 2014, have the
option to choose to (I) continue and complete their educational program or (2)
withdraw and obtain a full refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund; Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students
enrolled at those institutions it plans to sell infonnation regarding the status of the
institutions and the options and protections afforded to those students. In addition to
speci?c disclosures drafted for use for students at teach-out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could reSult in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further
informs prospective 'students that if a school is sold, any new owner might make changes
to their educational pro gram, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating 
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andfor grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Departmont instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthiau?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental financial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recertification to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govem school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student borrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we de?ned
refunds in such. cases to include repaying any private student loan or debt to any other lender
from whom Corinthian received direct disbursements for such student?s cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Borrowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online?only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options far students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
accrediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override States? ESponsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by-case basis. In the end,
however, the Department?s concerns and intemsts are the concerns and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the Department will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
quali?cations established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain ajudgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP Af?liates, under the leadership of former US
Attorney Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
con?dent that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Horwich, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

MW

Arne Duncan

THE SECRETARY OF EDUCATION
WASHINGTON, Dc 2o2o2

 

August 4, 2014

Edward J. Markey
United States Senate
Washington, DC 20510

Dear Senator Markey:

Thank you for your letter of June 25, 2014, concerning Corinthian Colleges, Inc. (Corinthian).
The US. Department of Education (Department) is doing everything it can to protect students as
a result of the sale or closure of Corinthian?s institutions of higher education, including seeking
to avoid or minimize the disruption to students? lives and educational aspirations that you note
could otherwise result from their abrupt closure. At the same time, we are continuing to perform
our important oversight work of Corinthian and will hold the company accountable for
compliance with the requirements of the Higher Education Act of 1965, as amended (HEA) and
our regulations.

I am pleased to report that on July 9, 2014, the Department reached an agreement with
Corinthian on a process to govern the eventual closure and sale of its institutions. The Operating
Agreement covers certain issues that are directly responsive to some of the issues you raised in
your letter, and I appreciate the opportunity to provide further detail. However, please note that
the recent events unfolded at an accelerated pace; that the scope of potential institutional closures
and sales associated with a single corporate entity is unprecedented; and that circumstances
remain quite ?uid and will c0ntinue to evolve. As a result, we will continue to review our plans
and processes going forward to ensure that we are continuing to do all we can to protect both
students? and taxpayers? interests as Corinthian?s participation in the Federal Student Aid
programs ends.

The agreement reached with Corinthian includes features that your letter urged the Department
to consider. For example, Corinthian will cease to enroll new students in certain 
described below, and will make disclosures to affected students conceming their options and the
status of their respective institutions. In particular, and with respect to your speci?c questions:

II As of July 9, 2014, Corinthian has identi?ed those institutions it plans to sell, as well as
those institutions it plans to close a?er providing students who are already enrolled with
time to complete their educational programs (?teach-out? institutions). Corinthian is
required, under the Operating Agreement, to cease enrollment of new students at teach-
out institutions. In some cases, Corinthian may work with another institution so that an
enrolled student would complete hisfher educational program at such other institution.

0 Under the Operating Agreement, certain students in a teach-out school may have options
that vary depending on their date of enrollment.

Page 2

0 Students who enrolled prior to June 23, 2014?the date the Department placed
Corinthian on heightened ?nancial oversight?will be able to either (1) continue
and complete their educational program or (2) withdraw and obtain a full refund
of all tuition and other fees paid for their program. Under the agreement,
Corinthian will determine whether to provide these students the Option of a full
refund of tuition and charges paid or the ability to complete their education as
originally intended. Students who complete their education under this option
would not be eligible for a closed school loan discharge. Students who qualify for
a Corinthian refund will have the refund applied to their Federal loan balances,
and may qualify for a closed school loan discharge of the remaining amount
owed, if any. Students will have an opportunity to appeal Corinthian?s decision
regarding the option they may pursue.

Students who enrolled on or after June 23, 2014, and before July 8, 2014, have the
option to choose to (1) continue and complete their educational program or (2)
withdraw and obtain a full refund of all tuition and other fees paid for their
program. Under the Operating Agreement, Corinthian must provide these
students the ability to choose whichever option bene?ts them the most. Further,
under the agreement, students who fail to make a choice will be withdrawn from
their program and provided a full refund. Students who complete their education
would not qualify for a closed school loan discharge of their Federal loans.
Students who qualify for a Corinthian refund will have the refund applied to their
Federal loan balances, and may qualify for a closed school discharge of the
remaining amount owed, if any.

Under the Operating Agreement, Corinthian is also required to disclose to students
enrolled at those institutions it plans to sell information regarding the status of the
institutions and the options and protections afforded to those students. In addition to
Speci?c disclosures drafted for use for students at teach-out institutions discussed above,
the Department has drafted disclosures for Corinthian to provide to prospective students
enrolling in institutions identi?ed as being for sale. The disclosures inform prospective
students that certain Federal and State authorities are investigating the institution and that
these investigations could result in future enforcement actions that might negatively
affect students? ability to complete their educational programs. The disclosure further
informs prospective students that if a school is sold, any new owner might make changes
to their educational program, and that it is possible that any credits they earn at a
Corinthian institution may not transfer to another school. Further, the Operating
Agreement requires Corinthian to obtain signed acknowledgments from new students that
they have received the disclosure prior to enrollment to ensure, to the best of the
Department?s ability, that students are fully aware of the pending sale of the school and
what that could mean for their studies.

Please note that the Operating Agreement contemplates that the status of any particular
Corinthian institution could change as a result of the Department?s ongoing review of
Corinthian?s compliance with statutory and regulatory requirements. In January, the Department

Page 3

denied Corinthian?s request for approval to add certain new locations and programs at selected
institutions because it had admitted to falsifying placement rates andJ'or grade and attendance
records at various institutions and because of ongoing State and Federal investigations into
serious allegations with respect to Corinthian?s administration of the Federal Student Aid
programs. Because these issues suggested systemic de?ciencies in the operations of Corinthian
as a parent corporation of its individual institutions, the Department instructed the company to
provide certain required documentation and information with respect to placement rate
percentages, and grade and attendance record changes at all Corinthian institutions. Corinthian?s
failure to substantially comply with our request is what led the Department to place it on a
heightened level of Departmental ?nancial oversight and precipitated the establishment of the
Operating Agreement.

Under the Operating Agreement, if the Department ?nds, based on its reviews, that certain
Corinthian institutions are ineligible for recerti?cation to participate in Federal Student Aid
programs, or are otherwise determined to be ineligible to participate, Corinthian is required to
provide students their choice of whether to (1) continue and complete their educational program
in accordance with regulations that govern school closures, as in the case that institutions are
found to be ineligible, or (2) withdraw from school and receive a full refund of all tuition and
other fees paid for their program. In addition, in these circumstances, students may be eligible
for closed school loan discharges of any Federal student loans they took out for attendance at the
formerly eligible institution. The conditions and quali?cations pertaining to closed school
discharges are different from those for the refund Corinthian is obligated to provide under the
Operating Agreement; an affected student berrower may qualify for both, either, or neither.

You also asked how the Department will seek to ensure relief for Corinthian students with
private student loan debt. In the Operating Agreement, we require Corinthian to include private
student loans within the refunds that the company provides to students. In particular, we de?ned
refunds in such cases to include repaying any private student loan or debt to any other lender
from whom Corinthian received direct disbursements for such student's cost of attendance at
Corinthian the amount of such disbursements, including reimbursing the student for any
origination and other fees incurred by the student in obtaining a private student loan. Absent this
explicit provision in the Operating Agreement, the HEA does not otherwise authorize the
Department to seek such relief, and closed school loan discharges pertain only to Federal, not
private, student loans. As to other relief that may be available for students who have obtained
private loans, the terms of the loan agreement may permit the borrower to assert, as defenses to
repayment, claims that the borrower has against the school. Ber-rowers should review their
private loan agreements to determine whether they include a provision allowing such defenses.

The Operating Agreement makes no distinction between students enrolled in online-only
programs and students who enroll in programs that require physical attendance.

In addition, you ask how the Department plans to ensure that students are properly noti?ed of
their options in cases of school closures and sales, and the consequences for students in cases of
program changes by a new owner of a school consequent to a sale. A number of the disclosure
requirements within the Operating Agreement are outlined above, and the Department is
currently developing a more detailed plan to ensure it is prepared for both an entirely orderly

Page 4

closure and transition of all Corinthian?s institutions, as well as a precipitous closure of all of its
institutions, should either occur.

School closures and sales are not uncommon. However, the simultaneous closure and sale of as
many institutions as comprise Corinthian, and that affect as large a student population, is without
precedent. The Department is building upon and modifying existing plans for school closures
and sales to bring them into line with the scale of Corinthian?s operations. These plans include
how the Department will coordinate with accrediting agencies and State authorizing agencies
that, under the HEA, have principal roles and authorities in these cases. For example, the
potential consequences and options for students as the result of any particular change in
ownership will depend on, among other things, the interest and willingness of a buyer to accept
and comply with any particular condition, the particular requirements or conditions that an
acerediting agency may impose, and the conditions a State may require, given that the HEA does
not generally preempt State law or override Statess responsibilities for authorizing institutions
that operate within their borders. As a result, the features and conditions of any particular sale,
and the consequences and options for students, could vary on a case-by?case basis. In the end,
however, the Department?s concems and interests are the concerns and interests of students and
taxpayers, and the Department will strive to ensure their welfare in the subsequent closure and
sale of Corinthian?s institutions. To be clear, the will not approve a sale to another
entity if that entity is currently under State andfor Federal investigation or is unable to meet the
qualifications established under the HEA to qualify for Federal Student Aid.

With respect to your question about borrowers? right to present claims to the Department, the
Department recognizes as a defense to repayment of Direct Loans a claim that the borrower has
against the school that is based on the making of the loan or the provision of educational
services, if State law recognizes such a claim and if the borrower proves the elements required to
establish the claim.

A borrower or class of borrowers who obtain a judgment against a school upholding a claim can
more readily establish that claim as a defense to repayment, but the borrower is not required to
sue or obtain ajudgment against the school in order to assert the claim against the school as a
defense to repayment of a Direct Loan. Department regulations explicitly provide that a
defaulted borrower may assert that the defaulted loan is not legally enforceable, but a borrower
who is not in default can also assert a claim that the loan is not legally enforceable on the basis of
a claim against the school. To do so, the borrower should present the claim to the servicer
handling the Direct Loan for the Department.

Finally, as part of the Operating Agreement, the Department required that an independent
monitor would be appointed to oversee Corinthian?s actions. I am pleased to report that
Skadden, Arps, Slate, Meagher Flom LLP Af?liates, under the leadership of former US.
Attorney Patrick Fitzgerald, has been selected to take on this monitoring role. The Department is
confident that Mr. Fitzgerald and his team will strengthen our efforts to oversee this process.

I appreciate your recommendations to the Department as we move forward in addressing issues
arising from matters related to Corinthian?s decision to wind down and cease Operations. We
continue to analyze how we can best protect students and taxpayers, and in so doing, will

Page 5

continue to actively consider your recommendations. If you have additional questions, please
have your staff contact Lloyd Homich, Acting Assistant Secretary, Of?ce of Legislation and
Congressional Affairs, at (202) 401-0020.

Sincerely,

MW 

Ame Duncan

Congress of the ?atten grates
Washington. Edi 20515

Secretary Arne Duncan 35,1

Department of Education ?3 
400 Maryland Ave. sw if 
Washington, DC 20202 gr
July 10, 2014 U1 9:39..

Dear Secretary Duncan, 

C: 

We are writing to thank you for your work to hold Corinthian Colleges Incorporated accoi?able 

:1

for persistent misconduct and to join the concerns voiced by Senator Dick Durbin and his 
colleagues. As the Department of Education moves forward in the agreement reached with
Corinthian Colleges, everything possible must be done to protect students who may be affected
by the sale and closure of Corinthian College campuses.

For too long, many for-pro?t colleges have been able to take advantage of hardworking students
looking to education as a way to jumpstart their careers. Many of these students are misled by
their schools and do not receive the education they were promised and are left with tens of
thousands of dollars of debt. We have also seen a number of for-pro?t college campuses close
abruptly, abandoning their students and leaving them to deal with ?nding a school to continue
their education, or discharging their loans. Many of us in Congress have helped students in our
own districts discharge their loans and get back on their feet. The ?nancial stress that these
closures place on students is dramatic and must be addressed.

Investigations by four federal agencies and 20 State Attorneys General have shown Corinthian
Colleges has a record of pervasive misconduct and deceptive practices, all the while reaping the 
bene?ts of billions of dollars in federal ?mding. With more than 70,000 students nationwide, the
sale and closure of Corinthian College campuses poses an unprecedented risk that could cripple
the safety net provisions in place for students. While we applaud the Department?s actions to
hold Corinthian Colleges accountable, we must ensure these students do not pay for the mistakes

of this company.

As such, we join the concerns voiced by Senator Dick Dnrbin and his colleagues in the
Senate and reiterate the following:

We urge the Department to:

Immediately prohibit Corinthian ?'om enrolling new students.
- Require Corinthian to fully inform students of the company?s intentions related to the

sale or closure of speci?c campuses.
Prohibit any for?pro?t company or school that is under federal or state investigation from

purchasing or participating in teach-out processes of any Corinthian campuses.

PRINTED CIN RECYCLED PAPER

We request answers to the following questions:

- Do students at closing campuses have the option to refuse a planned teach-out and instead
seek Closed School Discharge? If so, how will the Department ensure students are
properly noti?ed of their options?

- What process exists for borrowers who do not qualify for the Closed School Discharge to
bring claims to the Department that the school?s potential violations of the law are a
defense to repayment? Will individual borrowers have to bring separate actions for such
an option or will all borrowers subjected to the same improprieties be granted relief? Will
this process be extended to all borrowers regardless of payment status?

- If a Corinthian school is purchased and the new owner closes programs, but maintains the
campus, what relief will the Department provide or require to be provided to those
students?

a How will students enrolled in online-only programs be dealt with?

- How will the Department seek to ensure relief for Corinthian students with private
student loan debt?

it Will the Department inform Corinthian College students of their rights by directing all
loan services to inform students of the process to have their loans discharged?

In addition, we request that the Department inform us as to whether the Department will notify
Corinthian College students of their rights by directing all loan servicers to inform students of
the process to have their loans discharged. We would appreciate a prompt response to each of the

requested actions and questions. We applaud your efforts to hold Corinthian Colleges
accountable as well as all bad actors in the for-pro?t college industry.

Sincerely,

Janice Hahn  i 
Member of Congress er of Congress

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June 20, 2014

The I lonorahle Ted Mitchell
Under Secretary

.S. Department of Education
400 Maryland Avenue, SW
Washington, DC 20202

Dear Under Secretary Mitchell:

I write to followup regarding the two messages that I le? you earlier today, and thank
you for having Mr. Lloyd Horwich contact my Chief of Staff, Mrs. Lale Morrison.

I understand that the Department is currently working with Corinthian Colleges, Inc. to
address several oversight matters pertaining to the institution.

I respectfully request that the Department afford Corinthian Colleges, Inc. the
opportunity to provide in a timely manner all the necessary documents that you have

requested.

1 am very concerned about the potential impact that this may have on the 72,000 students
Corinthian Colleges, Inc. serves, as well as its 12,000 employees.

Thank you for your time and attention to this matter. If you should have any further
questions, please do not hesitate to contact me at (202) 225-1313.

i?ly,
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The Honorable Arne Duncan
Secretary

Department of Education
400 Maryland Avenue, SW
Washington. DC 20202

Dear Secretary Duncan:

am writing to you with a number ofduestions regarding the effect on students in Washington State
of the Operating Agreement announced by the Department of Education and Corinthian Colleges
Incorporated [Corinthian College) on July 3. 20M. As you knew. under the agreement. l2
Corinthian will be closed and an additional 35 affiliated US institutions will be offered for
sale.

Corinthian College owns and operates Everest College, which has six locations in Washington State
and enrolls nearly 3,000 students. It is my understanding that all ofthese sites will be offered for
sale. On behalfofthe 3,000 students. whom i represent, and the communities affected, am seeking
clarity on how the Department intends to protect students in Washington State and ensure that they
and the communities are informed ofthe potential effects of the shutdown on them and their
academic programs.

The Department of Education is uniquely positioned to advocate for and provide important guidance
to these students. Unless students receive clear, up~tohdate, and relevant information on the status of
their legal, educational. and financial options involving their relationship to Everest College and its
parent company. I am concerned they will be unfairly hindered when it comes to assessing
opportunities for continuing their education and career goals. Students will also need information on
their federal, state, and other student aid options. The Securities and Exchange Commission (SEC)
requires publicly traded corporations to notify stockholders of material changes, which in
Corinthian?s case included its plans for each campus. Students have also made an investment in
these institutions and should be afforded the same eourtesies and similar in formation. I ask,
therefore, how current students at Everest are being informed ofthe potential sale. and ofwhat could
happen iftheir campus is sold. If it is not sold, what are their legal rights when it comes to financial
and legal contracts they maintain with the schools in Washington State, and with Everest College and
its parent company?

Under the Higher Education Act, the Secretary of Education must identify and notify all students
affected by school closures of how federal student loans are to be discharged, which includes sending
them a "dome! school discharge application" (34 CFR 635.214). Can you tell me when and how you
will be notifying students at "teach out" schools ofthis option? And if some ofthe 85 sites for sale
do not find a buyer and therefore are forced to close, when and how will you he notifying those
students?.l Will relevant information such as each student's outstanding federal loan balance. and
the availability ofsimilar degree and certificate programs be provided in a clear manner that is
useful to students attending either closing ?teach out" and ?liar sale" locations?

   

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When students at ?teach out" catnpuses are notified ofthcir options. how long will they have to tnake
a decision??

In addition to federal student loan discharge. will the Secretary investigate private student loans held
by Corinthian? Private student loans cannot be discharged in bankruptcy. How will Corinthian
College be forced to address these loans for education and related living expenses incurred by
students?

How will l?ell grant eligibility be addressed for students affiliated with closing schools?

lam concerned that ol'tlte 85 schools for sale. some may ultimater be closed. Apparently the
Agreement allows Corinthian College to continue to enroll students in the ?for sale" locations, such
as the sis locations in my state. but prohibits them from enrolling new students at "teach out"
campuses. What happens to students if some attire "for sale? locations are ultimately closed? What
happens if the locations remain open under new ownership but sotne academic or other programs
within the locations are terminated?

As you know Everest College is nationally accredited, and many of the academic credits that
Washington State students have earned or are earning wiil not transfer to local universities. which are
regionally accredited. in your negotiations with the company, have you discussed whether students
will be refunded the cost ofcredits that do not transfer to other accredited colleges and universities?
Will the Department or anyone else reach out to students or set up call centers or similar offices to
field questions from the students and affected parties about their options to continue at Corinthian,
transfer to another school. andi'or receive a refund or discharge??

How is the Department working with local community colleges. community leaders. the local
workforce investment boards. universities. and others to help affected students transfer to an
accredited degree program ifthat is what will give them the best opportunities for successful
completion without burdensome debt?

Finally, 1 ask that you establish a point ofconlact within the Department of Education that students
affiliated with Everest College can access if they have questions. As this letter outlines. and as I am
sure you fully understand. the current situation necessarily creates very considerable uncertainty for
students and communities in \k-?ashington State. I believe your Department is in the best position to
oversee the process and ensure that students in ?v?i?ashington State are assisted throughout as they
attempt to continue their educations.

Thank you for your prompt response to these questions and all your work to ensure that students
affiliated with Everest College. and its parent company, Corinthian College, are informed oftheir

options and are able to make the best decision under these uncertain circumstances.

Sincerely,

(P 
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United States Senator

cc: The Honorable Mitchell. Undersecretary

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Mr. Jim Shelton
Deputy Secretary

Mrj;'Ted Mitchell
Undersecretary; PiJ'st-Sejoondary Education

 Dispamnent of Education
ADQ M?1fyi3nd Avenue, SW
"Washington, 13.020202

Dear Nth. Mitchel]:

Itfhas been brought taE Qty-attention.th the US. Department of Education has? recently placed extreme
?nancial eonst'raints on Corinthian Colleges, the company?s timely 'ae'eess to federal
?nancial aid. It'is nay-understanding the Depaitmeut of Education has. requestedzextensiue documents be
'prouidedby Corinthian Colleges for review, and Corinthian has acted in good faithto try to providethese
documents as jexiqeiditiously as possible.

While 1' commend desire Etta-protect our nation?s: students fromg'fra-ud-uient-and malicious
activity"by-any regardless: of tax stunts, I believe the Department can and
should demonstrate leniency-as Magus-Corinthian Colleges, lne. continues to expeditiously 'andrearnestiy
cooperate-by providing the deeuments requested.

{If utmost eoneer-n is the thousands of students attending the, i4 Corinthianuaffiliated campuses
throughout the state of'Florida it would be nothing less than an injustice to disrupt the edueatio'nal
endeavor to by forcing Corinthian io shut
their-doors. Gubehaifiofrmy constituents-,1 request the Department their'latest
metre torih'o'ld funds ?'om'Corinthian-Ce'lleges in otdee to prevent, the elosurej .oi'any campus and allow
additionai-time for=oomplianse-a5 long-as Gorinth'i'an is acting in good faith to any and all'iequests.

Thank you for. consideration in this matter. Piease: do not hesitate to Contact? nie- for
clarification 

      

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Juljr16,-2014

The Honorable Arne Duncan
Secretary of Education
U.S. Department of Education

Dear Seeretary'Duncan:

limits to request- a-robust exercise of discretionary authority to correct de?ciencies within
theeoperatingagreement the: Department of-Education entered into with Corinthian Colleges
Incorporated. To the fullest ext'entof the Department's statutory andregulatory authority, it must
ensure that: (1) students have an unquali?ed ability to withdraw from Corinthian schools, obtain
a refund, and discharge their student loan debt; and, (2) that Corinthian bears most of the
cost of these refunds.

When the Department subjected, Corinthian to Heightened Cash Monitoring (HCM) on June
1-2, 2014, it did not expect this decision to cause the corporation?s slow and pain?tlcollapse.
status meant that Corinthian could not receive federal funding-for a2 1 -day' period until
certain requested documents were veri?ed. Corinthian alerted its shareholders that-long before
the end of that period it would become insolvent.

in response, and presumably in the best interest of students, the Department announced a=$16
mil-lion emergency disbursement that would keep Corinthian open just long enough to agree with
the Department on the terms of its campus sales and closures. I am concerned with the 
Department?s decision tokeep' these schools open, especially if doing so means denying students
the ?nancial relief options available to them. 

1.. The distinction between Teach Out and Sales Schools isartificial

The eperating agreement provides that all schools not listed as a ?Sale School? (those that
Corinthian will attempt-to sell) will be designated as ?Teach Out Schools.? However,_this is not a
material distinction for most students. Under the terms of the agreement, the only,r students
pennittcd- to receive an unqualified refund of all direct costs are those who enrolled at a Teach
out School between the date of the Memorandum of Understanding that accompanied
emergency funding and the effective. date of this operating agreement.

All other students, many of whom Were liker subjected to Corinthian?s deceptive high
pressure enrollment practiCes, will be forced to complete their degrees. Corinthian itself will
decide whether to provide re?m'ds to those at Teach Out Schools,,'even though it is in

 

 

 

 

 

Corinthian's interestto force all these students to Complete their programs. The students at the
remaining 35 Sale Schools will be forced to Complete their programs under new owners, unless
their particular program is discontinued.

Forcing students to complete their-education at Corinthian will not only result in higher rates
of default on student loans, it will also den},r them the opportunity-to discharge their -student loan
debt,- 1 ask that youu'sesthe Department?s discretionary authority to eliminate this artificial
distinction :andrmake i?illzrefunds, including federal loan discharges, available to an Corinthian
students.

2. The terms of the ?reserve fund? that will provide students with refunds is vague and
will cost taxpayers millions unnecessarily

The operatingagreement-provides for a ?-?reserve' fund? of at least $.30 million ?to be used
exclusively for. student refunds.? Funding Williapparently come from both Corinthian and the
D?pmment, to the extents'that both parties to providc'the. funds. This. places no
obligation on Corinthian to provide its students with re?mds and instead-places that burden on

the. Americantaxpayer. Youmust exercise the Department?s maximum discretion under federal
law toextract fromCorinthian' sufficient amounts to make whole the students it has failed.

Lastly, as. the Department works to hold accountable for-pro?t institutions that produce
nearly half of all student loan-defaults, I ask that you notify Congress of your plans and needs for
addressing these crises in the future. In addition, ask that you share your plans for better

identifying, monitoring, and taking actionagainst schools that fail the  ?nancial
responsibility score. If the Departmentihad done a better 'job of monitoring Corinthian?s?nances
when it?rst gave it a failing fmancial responsibility score in November 2012, it would have
understood-Corinthian's precarious cash position. The Department could then have-used its
authority to require that Corinthian post a letter of credit or some 'other kind of ?nancial security
to .avoidenormous taxpayer and student losses.

I also urge the Department to stand ?rm in itscommitment to enact strong gainful
employment standards. Had such standards been applicable to Gorinthian programs, this
situation may-have'been avoided. A gainful employment standard not only forces schools-to
either improve. or end. such programs, it also .can help the Department to better identify'5schools

and take-appropriate action to pro'teht taxpayers and students.

In terms of oversight, I ask the Department to strengthen the auditing and monitoring of Title
IV disbursements to Corinthian. As it stands, the agreement allows Corinthian to select the
auditor and places an ?independent? monitor on: the corporation?s payroll. This is unacceptable.

Otherlarge institutions will face similar'problems in; the future. If HCM status or any added
pressure causes these institutions to wind-down, as it did with Corinthian, the Department must
'3be prepared to letthose closures unfold. The Department must not place students at other for-.
pro?tcollegejs'inthe same difficult'position as Corinthian students. They should be allowed to
avail'themselves of a closed-echoed discharge ofitheir student loan debt. The Department should
alsojensurethatrefunds aremade available to them. Finally, to the-extent-the Department

 

 

 

 

already knows that any schools are struggling ?nancially, it should immediater take action to
protect taxpayers and students.

you. for your prompt response to our questions and concerns. I would-appreciate it if
the Department could respond to my concerns in writing before Corinthian is scheduled to report
its ?teaeh?out plans? on Jul)?r 22, 2014. look forward to work-ingwith the Department to-address
these-ongoing issues and to protect our predatory institutiOns.



  
  

  
 
 

  

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June 24, 2014

The Honorable Gabriella Gomez

Assistant Secretary for Legislative and Congressional Affairs
United States Department of Education

400 Maryland Avenue, SW

Washington, District of Columbia 20202-3100

Dear Assistant Secretary Gomez:

One of my constituents, Jill Cochran, contacted me regarding a matter in which I believe
your agency could be helpful. Therefore, the enclosed communication is submitted for your
review.

I would very much appreciate your responding to the points raised by Ms. Cochran, and
offering any assistance available under the applicable laws and regulations. In addition, I would
be especially grateful if you could respond to the constituent directly as well as my Washington,
DC. office. I you need additional information regarding this correspondence, you may contact
Melissa Buchanan ofmy staff at (202) 225-31 15.

Thank you very much for your consideration and for advising me ofany action you
should take in this matter.

Sincerely,
A/?f/wa
Ed Whitfield

Member of Congress

Enclosure

Mattress at the Estates    

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E-Mail Viewer


 

 

   

 

 

 

 

From: 
Date: 6fl9f2014 5:05:33 PM

To: ?kyO ima@mail.house.goy? <ky0 

Co:

Subject: EDU

 

(bll?l; 

 

 

 

I-Iello Representative Whitfield}

I am writing you with an urgent message to help Corinthian Colleges to he released from a 21 day
hold for imposed by the DOE. I am a 1 1 year employee or Corinthian and have served
thousands of High School seniors looking at so? skill development and professionalism.

I love our students (70K) who would be without a place to go to sehool starting next week. These

students are striving for success; a shut door would only dash their dreams. The company's 15K
employees would also be drawing unemployment. Our doors will shut next week if no movement is

made. Please helpl

Jill Cochran
Murray, KY

PHONE. TYPE: Voice

(Voice is normal phone, VP is VideoPhone, 'l?Tl) is Text-Telephone Deyiee)



6l24l'2014