Failing Corinthian Colleges Inc. hopes to sell rather than close its Bay Area schools, the company revealed Monday, but worried students are taking little comfort in its going-out-of-business plan.
The career college giant -- which succumbed to a freeze on its federal student aid money imposed in June by the U.S. Department of Education -- is seeking buyers for a half-dozen area campuses including Fremont's WyoTech and its Heald College branches in Concord, San Jose, Hayward, San Francisco and Stockton, company officials said in a Securities and Exchange Commission filing.
Under an agreement with the federal government, Corinthian had announced last week it would sell 85 of its 97 U.S. schools and close the rest but gave no specifics at the time.
On Monday, spokesman Kent Jenkins said the company's plan would "allow the vast majority of our campuses to continue serving their students and their communities under new ownership."
But such assurances aren't enough for students on edge as they await the final word, fearing it could be a tough sell, a concern that an industry analyst said has some justification.
"It's kind of scary," said Cathryn Murray, who attends Heald College in Concord. "What happens if they don't get a buyer? What happens to us?"
The sale of 85 U.S. campuses will likely be complicated by the company's financial challenges and regulatory battles, including those leading up to its closure, said Corey Greendale, who follows 12 publicly traded education companies (though not Corinthian) for First Analysis Securities Corp.
"There are a lot of hurdles that buyers will have to get over whenever schools have both financial and regulatory issues like these," Greendale said.
On the other hand, he said, a favorable price could attract a buyer who could view the acquisition as "an opportunity to start over."
Corinthian is under investigation by a number of states' attorneys general and the federal government into allegations its colleges lied to prospective students and falsified attendance and job placement records, among other accusations.
Last month the Department of Education -- Corinthian's main source of revenue -- dealt the company a deadly blow, cutting the company off from federal student loans or grants for three weeks as a sanction for failing to give up information its investigators requested.
Corinthian receives about $1.4 billion a year in federal student loans and grants for its roughly 70,000 students, according to the department.
The department has since agreed to release some funding in exchange for Corinthian's promise to allow students -- even at closed schools -- to complete their educations elsewhere, a process known as a teach-out. It will appoint an independent monitor to oversee all expenditures.
The Santa Ana-based company has until July 22 to prepare plans for each school.
California's community colleges might get involved.
"We have signaled that we will offer whatever assistance we can to students who may be seeking options due to the closure or sale of Corinthian colleges," said Paul Feist, a vice chancellor.
Students at closed schools who don't complete their programs can apply for a full discharge of their federal student loans. California students may also apply for a refund from the state's Student Tuition Recovery Fund.
Generally, those who attend a school that is sold to another company are not eligible for a refund.
Most students want "just some resolution so we're not left hanging," said Jenni Stoehr, of Pleasanton, who attends Heald College in Hayward.
Stoehr said she was relieved to hear Corinthian planned to sell Heald, rather than close it. But, she wonders, "Are we going to be facing the same problems again in six months?"
Murray said she turned to Heald after "getting lost" at her community college during the recession, struggling to get into the classes she needed. Now she just hopes she won't have to start over again.
The Department of Education answers questions about loan forgiveness and eligibility for a "closed school loan discharge" at https://studentaid.ed.gov/repay-loans.