Future cloudy for WyoTech
The corporate parent of WyoTech, a for-profit automotive trade school with a campus in Burrell Township, said on Thursday that it is in danger of running out of cash and could go out of business.
Corinthian Colleges Inc., which operates WyoTech and other for-profit vocational schools throughout the U.S., said it may not be able to stay in business because the federal Department of Education has crimped its cash flow by putting a 21-day hold on the dollars it receives through federal student aid.
Usually, its schools have access to that money within one to three days of asking for it, the company said. Now it will have to wait three weeks.
Roughly 74,500 students attend Corinthian schools. Those students receive around $1.4 billion in federal financial aid, according to the education department.
Corinthian is dependent upon financial aid dollars to operate, and the company already was financially stressed before the department’s action — it has been selling or closing schools and has laid off scores of people. Over the last three quarters, it has lost roughly $94.4 million.
The education department said it imposed the hold because Corinthian “failed to address concerns about its practices, including falsifying job placement data used in marketing claims to prospective students and allegations of altered grades and attendance.”
The education department said it has asked Corinthian multiple times over the past five months for data related to its job placement performance.
However, Corinthian has not turned over the documents, it said.
“The department’s foremost interest is to protect students and make sure they are educated by institutions that operate in accordance with our standards,” said U.S. Education Under Secretary Ted Mitchell in a statement.
“We made the decision to increase oversight of Corinthian Colleges after careful consideration and as part of our obligations to protect hardworking taxpayers and students’ futures.”
Corinthian said it has been faithfully trying to comply with the request and plans to put even more resources behind the effort.
In fact, it said, it has increased executive-level oversight of the effort and has assigned 100 extra employees to the task.
In the meantime, it is in talks with the department to have the hold lifted. Those talks continued on Friday.
“Officials of Corinthian Colleges and the Department of Education engaged in a series of discussions throughout the day, and Corinthian believes these talks have been constructive,” the company said in a statement. “We are hopeful that the department and Corinthian can achieve an agreement that protects the interests of Corinthian’s students and employees, and U.S. taxpayers.”
If the department doesn’t lift the hold, the company said it will need to obtain other sources of liquidity, which may not be available.
The company said it has tried to obtain financing to sustain itself, but so far its lenders have been unwilling to loan it the money.
“If the company is unable to timely obtain alternate financing, the company’s cash flows will not be sufficient to meet its obligations as they become due, which would cause the company to be unable to continue as a going concern,” it said.
For-profit schools, and Corinthian among them, have come under close scrutiny by the federal and state governments on general allegations that they entice people to enroll in their schools through deceptive means and encourage them to take out expensive loans for degrees that ultimately don’t lead to meaningful employment.
Both Massachusetts and California are suing the company. Sixteen other states, Pennsylvania included, as well as the Consumer Financial Protection Bureau, are investigating the company’s practices.