Education officials in the Obama administration have decided a large and notorious chain of for-profit colleges should continue to operate instead of shutting down—even though the new owner is a debt collection company with no experience running schools and has its own shady past.

Corinthian Colleges, described by Republic Report’s David Halperin as “one of the most abusive and deceptive for-profit college companies” in the country, was on its way to going out of business when Education Credit Management Corporation (ECMC), a nonprofit student loan collector, said it wanted to buy it.

Officials in the U.S. Department of Education approved the deal in which ECMC will pay $24 million for 56 campuses operating under the names Everest and WyoTech.

Halperin says there are multiple problems with ECMC stepping in to assume control of the schools, calling it a “terrible mistake.”

For starters, ECMC knows how to harass students about their past-due student loans, not how to administer schools of higher learning, according to reports in the media and statements made by some members of the U.S. Congress. It has its own “checkered history that includes using ruthless collection tactics against student loan debtors who should have reasonably qualified for bankruptcy relief,” noted The New York Times.

Then, there’s the conflict of interest problem. “ECMC has insisted it won’t pay more than $24 million up front,” Halperin wrote. “So in order to recoup some of the taxpayer investment, the agreement includes an ‘Earn Out’ provision providing that ECMC’s new college subsidiary, Zenith, will pay the Department ‘up to $17.25 million … over a seven-year period’ based on a still-unspecified ‘percentage of funds that exceed targets specified by the Department.’”

“In other words,” he added, “the agreement would essentially give the Department an equity position, dependent on ECMC making a good deal of money. What’s the problem with that? The Department is charged with overseeing ECMC’s conduct — that it is not engaged in predatory marketing, or leaving too many students defaulting on their loans, or lying to the Department itself. How can an oversight body have a financial stake in a company it is charged with regulating? It’s a blatant and unacceptable conflict.”

Others objecting to the deal include a coalition of 50 civil rights, veterans, student, and consumer groups that wrote (pdf) to Education Secretary Arne Duncan, Attorney General Eric Holder Jr., and Consumer Finance Protection Bureau director Richard Cordray.

The coalition includes the NAACP, League of United Latin American Citizens, Iraq Afghanistan Veterans of America, Student Veterans of America, AFL-CIO, Consumers Union, and others.

-Noel Brinkerhoff

To Learn More:

Declaring Corinthian Colleges Too Big To Fail: A Terrible Idea (by David Halperin, Republic Report)

Durbin: “I Begged The Education Department” To Cut Funds To Disgraced For-Profit College (by Molly Hensley-Clancy, BuzzFeed)

Feds Sue Corinthian Colleges, Ask Court to Wipe Out Private Student Loans (by Ken Broder, AllGov California)

Rep. Virginia Foxx will Win Reelection Easily, So Why is She Raking in Big Money from Donors? (by Steve Straehley, AllGov)

U.S. Education Department’s Student Debt Collector Accused of Ruthless Tactics (by Noel Brinkerhoff, AllGov)