NEW YORK (MainStreet) — Corinthian Colleges said last week that it had made a deal with the Department of Education (ED) to keep the for-profit school in business long enough for it to sell assets and close down campuses in an orderly fashion. ED began to take action after Corinthian failed to report mandated enrollment numbers to ED, which also said that the school falsified job placement and attendance data.

"Throughout several days of intensive discussions, our goal has been to protect the interests of our students, 12,000 employees, taxpayers and other stakeholders," said Corinthian CEO Jack Massimino in a statement.

The coup de grâce came last week when ED put a 21-day hold on federal financial aid and grants, increasing the school's already significant cash flow problems. There is no specific time table for any shut down, although Corinthian said in a filing with the Securities and Exchange Commission that details of an operating agreement with ED could be expected on July 1. In the meantime, ED released $16 million in payments this week to keep the Santa Ana, Calif.-based school out of bankruptcy.

Corinthian has some 72,000 students enrolled across three entities: Heald College, WyoTech and the Everest College and University chains. Corinthian agreed to freeze enrollments at the campuses it is closing down after the company and the government figure out which ones those will be. Only Heald College, based mainly on the West coast, has regional accreditation. The others have the less prestigious national accreditation.

But until the fate of those campuses becomes clear, the company will be allowed to continue to enroll new students at all its schools for an unspecified period of time. Last month, Corinthian's board of directors authorized management to hire an investment bank to examine "strategic alternatives" — perhaps selling itself to a competitor. Could Corinthian morph into Corinthian 2.0?

Long-time critics have called the deal to let Corinthian continue to operate a government bailout of a fraudulent company. Its stock (ticker: COCO) was down nearly 8% on Thursday, closing at 30 cents per share.

Twelve senators that were willing on Monday to let the school continue to admit students changed their tune on Thursday when they called on ED to "immediately prohibit Corinthian from enrolling new students" in a letter to Secretary of Education Arne Duncan. They include Senate Health, Education, Labor and Pension committee chair Tom Harkin (D-Iowa), Barbara Boxer (D-Calif.), Bill Nelson (D-Fla.) and Elizabeth Warren (D-Mass.).

An enrollment halt would likely make Corinthian even less attractive to a prospective buyer.

In their letter, the 12 senators want students to be fully informed of Corintian's intention to sell or close the business, and that students not be "left in the lurch, scrambling to continue their education or discharge their loans."

Twenty state attorneys general have been investigating Corinthian. Illinois attorney general Lisa Madigan has called for the Corinthian to stop enrolling students in Illinois. AGs in California and Massachusetts have charged that Corinthian paid temp agencies to hire graduates in order to boost the school's employment stats. Corinthian has high student default rates and a low number of graduates who are able to secure gainful employment. Inside Higher Education reported this week that Corinthian has blamed its students; a relatively high number are from low income families and are ill-prepared for higher education.

--Written by John Sandman for MainStreet