Corinthian says financial score may cause it to lose federal student aid
Nov 5 (Reuters) - Corinthian Colleges Inc said the U.S. Department of Education gave it a financial responsibility score that falls below the minimum requirement that the company needs to allow its students easy access to federal student loans.
The company said that the Education Department calculated its composite score for the 2011 financial year as 0.9, below the minimum threshold of 1.0 needed for the Title IV federal student aid programs.
However, the company said its calculations showed that it had a composite score of 2.1 for 2011, excluding a $203.6 million goodwill impairment charge it took in the year.
Corinthian, which derived almost 85 percent of its revenue from Title IV in fiscal 2012, has said it is focusing on developing federal sources of revenue outside of the program.
Enrollments have taken a hit since the U.S. government started a crackdown on for-profit colleges for high student debt.
Corinthian, parent of Everest College, said the discrepancy in the score arose due to the Education Department's position regarding treatment of the goodwill impairment charge and certain other items.
If the company is unable to convince the department to reconsider its score, Corinthian will be forced to post a letter of credit with the department equivalent to at least $175.7 million, depending on the level of monitoring it is willing to accept.
The company said there was no assurance that it would be able to meet these obligations, failing which its 92,000 students could lose access to federal student aid.
Additionally, a failure to maintain at least a 1.5 score, could constitute a default under the terms of its credit facility.
Santa Ana, California-based Corinthian said officials from the Education Department have agreed to meet and discuss the issues with the company. It is also in ongoing discussions with its lenders.
Shares of Corinthian, which have risen 25 percent this year, closed at $2.74 on the Nasdaq on Friday.