Corinthian Colleges Updates Guidance for Q3 11 New Student Enrollment and Provides Estimated Average 2010 Cohort Default Rate

SANTA ANA, Calif., March 14, 2011 /PRNewswire/ -- Corinthian Colleges, Inc. (Nasdaq: COCO) updated its guidance today for new student enrollment in the third quarter of fiscal 2011, and provided estimated average loan default rates for the 2010 cohort of students.

Enrollment Growth Guidance – We expect new student enrollment growth to decline by 21% – 23% in the third quarter of fiscal 2011, versus previous guidance that new enrollment growth would decline by 15% – 17%.  As previously reported, we discontinued enrolling ability-to-benefit (ATB) students (i.e. students who lack a high school diploma) on September 1, 2010 as part of an effort to improve cohort default rates.  Excluding the loss of ATB students, we expect new student enrollment growth to decline by 5% – 7% in the third quarter of fiscal 2011 versus our previous guidance of "flat to slightly up."  

We believe that the deterioration in new student enrollment growth versus previous expectations is primarily the result of a tuition price increase for diploma programs that went into effect on February 1, 2011.  The increase, which averaged 12%, was taken to ensure that the company would remain in compliance with the federal 90/10 Rule beginning in fiscal 2012.  Under the 90/10 Rule, no more than 90% of the company's revenue can be derived from the Title IV student financial aid program.  For more detail about the 90/10 issue, see the company's Q2 11 Form 10-Q, filed on February 2, 2011.  

As shown on the table below, guidance for Q3 11 revenue and earnings per share remains unchanged.

Cohort Default Rate Update – We continue to see positive trends in the area of cohort default rates (CDR), and now estimate that our average two-year CDR for the 2010 cohort of students will be 9%–12%.  This represents a substantial improvement over our average preliminary two-year CDR of 21.9% for 2009 cohort, and our average final two-year CDR of 19.0% for the 2008 cohort.  Given the improvement in our projected 2010 CDR, the company believes it is no longer at risk of exceeding federal default thresholds under the current two-year measurement rules; and believes it has significantly reduced its risk under the new three-year measurement rules.  Sanctions under the new three-year rules become effective in 2014.  

We attribute the improvement in the 2010 CDR to three main factors: 1) our substantial investment in cohort default management over the past 18 months; 2) stabilization in the wake of structural changes in student lending and the transition to direct lending; and 3) the increased participation of loan servicers in default management.  

About Corinthian Colleges

Corinthian is one of the largest post-secondary education companies in North America. Our mission is to change students' lives. We offer diploma and degree programs that prepare students for careers in demand or for advancement in their chosen fields. Our program areas include health care, business, criminal justice, transportation technology and maintenance, construction trades and information technology. We have 122 Everest, Heald and WyoTech campuses, and also offer degrees online. For more information, go to http://www.cci.edu/.

Certain statements in this press release may be deemed to be forward-looking statements under the Private Securities Litigation Reform Act of 1995.  The company intends that all such statements be subject to the "safe-harbor" provisions of that Act.  Such statements include, but are not limited to, those regarding our future cohort default rates and those under the heading "Guidance" above.  Many factors may cause the company's actual results to differ materially from those discussed in any such forward-looking statements or elsewhere, including: potential further negative effects on student demand caused by the Company's decision to raise tuition prices in order to remain in compliance with the 90/10 rule; potential negative effects from our decision to discontinue enrolling ATB students; the uncertain outcome of the Department of Education's pending rule making, recently promulgated rules, and ongoing inquiries by the Senate HELP committee, all of which could result in changes in federal regulation and legislation and in the manner in which we conduct our business; the company's effectiveness in its regulatory and accreditation compliance efforts; the Company's potential inability to manage the default rates of its students on their federal student loans; the outcome of ongoing reviews and inquiries by accrediting, state and federal agencies; the outcome of pending litigation against the company; risks associated with variability in the expense and effectiveness of the company's advertising and promotional efforts; the uncertain future impact of the company's new student information system and the company's new financial aid processing system; potential increased competition; bad debt expense or reduced revenue associated with requesting students to pay more of their educational expenses while in school; the potential inability or failure of the company to employ underwriting guidelines that will limit the risk of higher student loan defaults and higher bad debt expense; changes in general macroeconomic and market conditions (including credit and labor market conditions, the unemployment rate and the rates of change of each such item); and the other risks and uncertainties described in the company's filings with the U.S. Securities and Exchange Commission. The historical results achieved by the company are not necessarily indicative of its future prospects.  The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Corinthian Colleges, Inc.

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