Corinthian Colleges Inc. and the U.S. Department of Education have reached an agreement that will allow the for-profit education company to receive an immediate $16 million in federal student aid funds and keep operating.
The announcement comes just days after Corinthian cautioned that it may have to shut down because of its clash with U.S. regulators over student data and at a time when Corinthian is looking to sell off some of its schools.
Corinthian -- which owns the Everest College, Heald College and WyoTech schools -- said last week that the Education Department had limited its access to federal funds after it failed to provide documents and other information. The Education Department said it heightened its oversight of the Santa Ana, California-based company after requesting data ``multiple times'' over the past five months.
Corinthian said Monday that the memorandum of understanding reached with the Education Department will allow its schools to maintain daily operations without interruption. It currently serves about 72,000 students.
Corinthian said it will enter an operating agreement with the Education Department that will allow it to continue with its plan to pursue strategic options for its operations, including the sale and ``teach-out'' of schools. In a ``teach-out,'' no new students are enrolled but current students are able to complete their programs or transfer to another school.
Corinthian said it will continue to look for new owners for most of its campuses and hopes to have sales agreements in place within about six months.
The company plans to continue with the ``teach-out'' of schools that are underperforming or whose participation in Title IV student aid programs was ended by the Education Department.
Corinthian said the memorandum of understanding with the Education Department is a ``positive step,'' but it still needs additional liquidity to fund its operations. The company also disclosed that the Education Department is considering denying recertification or removing certification of institutional Title IV eligibility for certain Corinthian schools. Corinthian said many of its schools have provisional Title IV program participation agreements with the Education Department, while other schools' agreements have expired or are about to expire.
Corinthian said the Education Department could decline to renew expiring participation agreements or end existing agreements if it identifies ``significant institutional failures.'' Corinthian said that if this happens, depending on the school, it could have a material adverse effect on the company.
Details of the memorandum of understanding are expected to be finalized in an operating agreement by July 1.
Corinthian's stock rose 11 cents, or 31.8 percent, to 44 cents in morning trading.