Nov 5 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
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
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
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
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
Shares of Corinthian, which have risen 25 percent this year,
closed at $2.74 on the Nasdaq on Friday.