NEW YORK (MainStreet) — In the wake of the plan to sell 56 of embattled Corinthian Colleges’ 107 campuses to student loan servicer ECMC Group, questions have been raised about whether ECMC is an appropriate steward for this shaky enterprise, where the interests of the for-profit college’s students are widely believed to have taken a back seat to those of investors. Now other shoes have dropped.

A group of Democratic congressmen, including Rep. Steve Cohen (D-Tenn.), Raul Grijalva (D, Ariz.) and Mark Takano (D-Calif.), have asked Education Secretary of Education Arne Duncan to "carefully scrutinize" the deal. As a student loan servicer, ECMC's bread and better has been debt collection. The non-profit organization has been criticized for hounding bankrupt students in court and denying borrowers any relief in paying off their loans.

“Serious consideration should be given before transitioning management of Corinthian’s campuses from one company that profited off deceptive lending practices to an umbrella company that also has a checkered history in student loans,” the three legislators said in a letter to Duncan last week. In November, ECMC offered to take the 56 schools off Corinthian’s hands for $24 million, a fraction of what they would have been worth a decade ago.


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But it’s not a done deal yet. The remaining 51 Corinthian campuses not included are still open and will continue to lean on Uncle Sam.

“Corinthian will continue to operate our remaining campuses under the terms of our Operating Agreement with the U.S. Department of Education,” said Corinthian spokesperson Kent Jenkins. “These include our 13 Heald College campuses, 12 Everest and WyoTech campuses in the state of California, and 14 Everest campuses in Ontario, Canada. We don’t have current plans for any changes at these campuses."

ECMC said a new company, Zenith Education Group, would run the schools, and suggested that its experience in dealing with broke students would actually help the company revamp Corinthian’s ailing campuses. Reps Cohen, Grijalva and Takano fear a different outcome.

"We are concerned that neither the ECMC Group nor the Zenith Education Group has any previous experience in operating an academic institution," their letter said. "Rather, the ECMC Group, as one of the largest student loan guaranty agencies in the United States, has benefited by collecting loan payments from students, sometimes using dubious tactics. In 2012, a panel of bankruptcy appeal judges expressed concern that the ECMC Group’s collection activities ‘constituted an abuse of the bankruptcy process and defiance of the court’s authority.’”

ECMC has promised to lower tuition at some schools and offer scholarships. Citing the exorbitant price tag at Corinthian-owned colleges, which can cost “17 times more than comparable programs,” the congressmen said that ECMC should be more generous to students.

“The ECMC Group should do more reduce the dramatically inflated costs of attending in order to bring tuition down to a level in line with costs at credible academic institutions,” they said.

The Oakland, California-based Institute for College Access and Success has weighed in against the deal, as has Higher ED, Not Debt a Washington, D.C.-based student organization that believes a predatory loan servicer—ECMC—is adding a predatory for-profit college chain to its higher ed franchise.

“ECMC makes its money ensuring that students can’t declare bankruptcy on their student loans,” Higher ED, Not Debt spokesperson Maggie Thomson said in a statement.If nothing else, the deal has shed some unwanted light on ECMC, a large but relatively little-known player in the student loan industry, compared to higher profile servicers such as Sallie Mae, now known as Navient.

Meanwhile the Department of Education shows no sign of withdrawing its support. Under Secretary of Education Ted Mitchell has applauded ECMC’s promise to cut tuition by 20% for most new students at schools already infamous for higher ed price gouging.

--Written by John Sandman for MainStreet