About eight months after the implosion began, a significant chunk of Corinthian Colleges is officially in new hands.  Yesterday, the company formally closed the sale of 53 Everest and Wyotech campuses to the Educational Credit Management Corporation, or ECMC–a student loan guaranty agency and debt collector based in Minnesota. The schools will still use the Everest and Wyotech brands under the company name Zenith Education Group.

There are still some major outstanding questions about the overall deal, but the agreement finalized yesterday has some significant improvements from when it was first announced in November. The U.S. Department of Education and the Consumer Financial Protection Bureau secured $480 million in loan forgiveness for Corinthian students holding toxic private loans the school had awarded in the past. This will result in an immediate 40 percent reduction in debt levels for students, with indications that more forgiveness will come in the future. Addressing these private loans is a very important step since those debt instruments have no recourse for making payments more manageable the way federal student loans do.

ECMC also agreed to several provisions that should provide protections for future students. The company will abide by the gainful employment accountability standards, even for the degree programs that would have been exempt because the colleges is now nonprofit. ECMC also agreed to drop mandatory arbitration requirements in the face of outside pressure and will not not offer any private loans for at least seven years. There are also some additional disclosure requirements about how credits are unlikely to transfer, as well as data on median debt and placement rates. Coupled with earlier announcements about tuition reductions, increased grant aid, and the closing of some bad criminal justice programs, these changes will almost certainly make the new Everest a better option than it was under Corinthian.

Better than the worst is of course not a desirable quality standard for the long term.While gauging actual improvement in ECMC’s new holdings will take time, a few key things should provide an early window into how the company plans to do business going forward.

Exercising the Right to Choose

The first major test will come in the next week or so when ECMC starts its student choice provision. According to the school’s new website, ECMC will contact 40 percent of former Corinthian students that are enrolled in criminal justice or homeland security programs that are closing or certain business, paralegal, or accounting programs with low placement rates. Students in these programs will be given the option of 1) finishing their program, 2) transfer to a different program that can be paid for with a credit equal to what student’s already spent, or 3) withdraw and get a refund for all tuition and fees paid by students. Students who do not choose one of the options above within seven days of meeting with their school will be automatically continued in their courses.

The student choice process is the last major chance for still-enrolled Corinthian students to get out from under their debt loads. But it also has an inherent tension. While ECMC has been clear that it can sustain lower enrollment totals, losing the vast majority of students who are offered the choice provision would probably not be good for it. And the counseling will either have to be done by brand new staff or individuals coming over from Corinthian who may or may not be on board with what ECMC wants to do. Immediate transparency into the overall outcome of the student choice provision and close evaluation by the independent monitor the company is hiring for the next year will be very important.

Keep an Eye on Medical Assisting

Closing bad criminal justice programs and limiting enrollment in much of the school’s business offerings are important steps for acknowledging that Corinthian offered many programs of questionable value. (Also, why was the school even offering a bachelor’s degree in paralegal studies in the first place?) But there’s a glaring absence among the programs targeted for limitations: health care offerings.

According to gainful employment data, medical assisting and medical administrative assistant are the biggest programs at the Corinthian campuses acquired by Zenith. Neither looks all that great. The default rate for medical assisting is around 30 percent and the medical administrative assistants are not far behind at 28 percent. And earnings for graduates–around $14,000–are well below expectations. These programs cost anywhere from $15,000 to about $22,000, so will still be at or well above likely starting earnings even with a 20 percent tuition cut. What happens to the price  of medical assisting over time and the size of the program will be a bellwether of what’s being done to make the programs work better for students.

Who Stays, Who Goes?

It’s still unclear how far down the Corinthian organizational chart the problems went. This matters a great deal because ECMC’s lack of experience in running a school, relatively small size, and the large number of students it is acquiring means it will have to mostly rely on Corinthian staff and middle managers for day-to-day operations.  The extent to which it brings in outside leadership and cleans house will be worth watching.

Bonus for the Department: How Much Longer Does the Rest of Corinthian Last?

It’s been clear for some time that ECMC was not going to buy any of the Corinthian campuses based in California or those with the Heald brand. And at this point ECMC is only poised to acquire three more campuses–two in Arizona and one in New York that appear to be tied up in accreditation and state regulatory processes. While those campuses will be supposedly sold by March, it seems increasingly unlikely that anyone will be purchasing what’s left.

While the lack of buyers after so long suggests that it’s time to allow the remaining campuses to close down, the agreement finalized yesterday appears to prolong the inevitable. ECMC will charge Corinthian to provide some default management, student account, financial aid, and several other services for at least the next year. The services will be provided at cost plus a 5 percent markup at first.

Given that there was already speculation that Corinthian should have already ended up in bankruptcy, what is the value in continuing the remaining campuses for much longer, to say nothing of keeping them in business for an entire additional year?

[Cross-posted at Ed Central]

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Ben Miller is a senior policy analyst in the New America Foundation's Education Policy Program. He was previously a senior policy advisor in the U.S. Department of Education.