Le Cordon Bleu’s 16 U.S. campuses will shut down, with the culinary college’s operator, Career Education Corporation, announcing it will stop enrolling students after January 4. Campuses are expected to remain open until September 2017 to accommodate students already progressing through classes as part of the school’s “teach-out.”
Todd Nelson, the for-profit company’s president and CEO, says in a release that the school was seeking a new owner for Le Cordon Bleu North America, but “could not reach an agreement that we believe was in the best interests of both our students and our stockholders.”
Le Cordon Bleu has a much larger international footprint. The world’s largest cooking and hospitality school, established in 1895, is well known for its Paris flagship, where Julia Child trained in the 1950s. The U.S. location, through a marketing agreement with Career Education Corp., offers hands-on education programs in culinary arts, as well as patisserie and baking. The school, which has 9,200 U.S. students, also has online degrees in hospitality and management. The international brand is run seperately, and will not be shutting down operations.
“New federal regulations make it difficult to project the future for career schools that have higher operating costs, such as culinary schools that require expensive commercial kitchens and ongoing food costs,” Nelson says.
The Obama administration’s gainful employment rule was a deterrent to the school’s continued progress. It requires that student loan payments don't exceed 20 percent of a graduate's income after taxes. A recent Senate report showed, however, that a large number of students were withdrawing from the associate program and defaulting on student loans.
And this wasn't the first time the school faced such scrutiny. A 2013 class-action lawsuit led by former students of the college was settled for $40 million after claims that Career Education Corp. misled graduates on their chances to land employment out of college. The tuition, according to the school’s 2014-15 catalog, ranged between $16,000 and $42,500 a year. Many of the graduates in the lawsuit argued that they were holding low-paying jobs that netted just $12 an hour out of school.
Additionally, Career Education Corp. said in May that it planned to solely focus on online schools with lower margins, and was closing its remaining 24 Career College campuses, which specialize in business, art and design, health, and other subjects. The company expects restructuring charges of $52 to $64 million. It also notes that it reached an agreement with its lender to extend its credit agreement to December 31, 2018. The release says that the operation contributed $128.2 million and $172.6 million of revenue and $43.5 million and $66.6 million of operating losses for the nine months ending September 30, and for the year ending December 31, 2014, respectively.
“By moving forward with a teach-out process we are better able to protect student interests and also retain all of the rights that we currently have to the Le Cordon Bleu brand,” Nelson continues in the release. “We will continue with our plan to refocus Career Education’s resources on predominantly online university education as we endeavor to provide students attending schools in ‘teach-out’ with appropriate resources to complete their program of study.”