For-profit Corinthian Colleges, a national college corporation, cut a deal late last week to sell 85 of its campuses and gradually liquidate 12 others, according to several published reports.
The announcement, reported in The Wall Street Journal and elsewhere, comes after months of financial difficulties for the Santa-Anna, Calif.-based company.
Corinthian owns 107 campuses across North America and operates in more than 25 states.
The publicly traded company has confronted major federal restrictions concerning its access to federal student aid: the primary source of its revenue. The past year, the Department of Education, the Consumer Financial Protection Bureau and more than a dozen attorneys general had investigated Corinthian for allegedly falsifying job placement rates and misplacing student attendance records, according to a published report in the Los Angeles Times.
In response, the DOE put a 21-day hold on Corinthian's access to federal student loan money. The loan freeze threatened to derail the corporation, which receives $1.4 billion a year in government financial aid, according to the Journal report.
Faced with increasing costs and constrained financial resources, Corinthian struck a deal late Thursday with the Education Department to mitigate its shortfalls. The DOE said it will provide $35 million in student aid funding to Corinthian, but its finances must be closely monitored by an independent auditing firm, the Journalreport said.
In addition, the DOE said the college corporation has to stop enrolling students at the 12 schools it plans to eventually shut down. Last-minute enrollees at the 12 schools must also have the opportunity to receive a full refund. According to Journalreports, its enrollment for fall 2013 was down nearly 14% from a year earlier.
"This agreement allows our students to continue their education and helps minimize the personal and financial issues that affect our 12,000 employees and their families," Corinthian CEO Jack Massimino said in a Thursday press release. "It also provides a blueprint for allowing most of our campuses to continue serving their students and communities under new ownership."
Corinthian's financial issues have been compounded by the struggling for-profit higher education sector as whole.
The industry has had to adopt stricter, cost-saving measures as it confronts increasing competition from online courses along with a sharp rise in students' unwillingness to take on debt, according to the Journal report.
This fall, The Obama administration is expected to complete new, hard-hitting rules that would deny federal aid to for-profit schools whose students have high default rates on student loans, the Journal reported.
Corinthian's fiscal third-quarter net income decreased 11.7% year over year. Its shares closed Friday at 28 cents apiece, up a penny for the day. The past year, its shares have fallen 88%.