Historically, the Company had developed several loan programs with origination and servicing providers such as Sallie Mae for students with low credit scores who otherwise would not qualify for loans. These loan programs required that the Company pay a discount fee to the origination and servicing providers of the loans as a reserve against future defaults on these loans. The Company have historically referred to these types of loans as "discount loans," since the Company incurred a portion of the default risk related to these student loans by taking a discount on the disbursement. By accepting a reduced payment for these discounted loans from the servicing providers, the Company were not at risk for the amounts agreed to by them and the service providers but were not entitled to any proceeds collected by the service providers in excess of this amount. Therefore the Company had recorded this discount as a reduction to revenue.

In fiscal 2008, the Company was informed by Sallie Mae and two other origination and servicing providers that they would no longer make private loans available for students who present higher credit risks (i.e. subprime borrowers). In the face of this change in policy, the Company created a new lending program in the fourth quarter of fiscal 2008 with a different origination and servicing provider, Genesis Lending Services, Inc. ("Genesis"), which specializes in subprime credit. Under this Genesis program the Company pays a discount to the origination and servicing provider for any loans purchased by Genesis and records the discount as a reduction to revenue. The Company then has both the right and an obligation to acquire the related loan, except in certain limited circumstances where Genesis does not comply with the terms of the agreement. Since the Company initiated the Genesis program, the Company has acquired all of the loans that have been originated. Therefore, the Company is currently exposed to any credit defaults by students but retains all amounts collected from the students under the current program.

On June 29, 2011, the Company entered into a loan origination agreement with ASFG, LLC ("ASFG") for the purpose of creating a new private education discount loan program for the Company's students. Under the loan origination agreement, ASFG intends to fund new student loans over the next two years. Under this education loan program, Genesis will make private education loans to eligible students and, subsequently, sell those loans to ASFG or its designee. The ASFG loan program will be made available to Corinthian students starting in the first quarter of fiscal 2012.

This ASFG loan program has characteristics similar to the Company's previous "discount loan" programs. As with the Company's previous discount loan program, under this ASFG program the Company will pay a discount to ASFG for any loans purchased by ASFG and record the discount as a reduction to revenue over the period of instruction. However, unlike the previous discount loan programs, under this new discount program the Company has no right or obligation to acquire the related loan upon origination. Pursuant to a backup loan purchase agreement entered into in connection with the loan origination agreement, the Company will be obligated to purchase any of the student loans on which no payment has been made for over 90 days. Under this backup loan purchase agreement, the Company's maximum obligation (including the initial discount payment) could be equal to the face amount of loans originated under this loan program, although the Company expects its ultimate risk under this loan program to be substantially similar to the risks it faces under its existing discount loan program.

Under the loan origination agreement, the Company is required to pay certain discount, transaction, management, origination and default aversion and other ancillary fees to ASFG of approximately $17-19 million per year. The loan origination agreement contains standard representations, warranties and covenants made by each party, as well as limited termination rights and customary events of default.

Separately, the Company sold to ASFG, on a non-recourse basis, part of its current portfolio of student loans for $24.3 million. In the fourth quarter of fiscal 2011, the Company incurred a one-time impairment charge of approximately $6.9 million associated with the sale of these loans. The impairment charge is primarily due to the write-off of imputed interest.

Student notes receivable represent loans that have maturity dates that generally range between 12 to 60 months from the loan origination date but can have terms as long as 15 years depending on amounts borrowed. The interest rate currently charged on all new loans is a fixed rate of 6.8% with an origination fee of 1%. Included in the consolidated balance sheet at June 30, 2011 and June 30, 2010 is $77.1 million and $68.2 million of notes receivable, respectively.

		June 30, 2011			June 30, 2010

		(In thousands)
Accounts receivable:
	Accounts receivable, Gross	$	195,383		$	122,805
	Less allowance for doubtful accounts		(26,500	)		(27,533	)

	Accounts receivable, Net		168,883			95,272

Student notes receivable:
	Student notes receivable, Gross	$	154,952		$	129,058
	Less allowance for doubtful accounts		(77,846	)		(60,835	)

	Student notes receivable, Net		77,106			68,223

The increase in accounts receivable at June 30, 2011 compared to June 30, 2010 was primarily due to the Company not drawing down approximately $87.0 million of Title IV funds as of June 30, 2011 (which was subsequently collected in July 2011).

The Company monitors the credit quality of its portfolio using proprietary forecasting, which relies heavily on credit information and credit scores provided by third-party credit bureaus. These proprietary forecasting models are also based on impairment trending, delinquency trending, and population trending. The loan reserve methodology is reviewed annually during the fourth quarter or earlier in the year upon the occurrence of certain events or substantive changes in circumstances that indicate a change to methodology is warranted. Delinquency is the main factor of determining if a loan is impaired, as loans are charged off after 270 days delinquency. Once a loan is impaired, interest no longer accrues. The income and fees earned on impaired loans was immaterial during fiscal 2011. In fiscal 2011, the Company has charged-off $55.3 million of Genesis notes net of recoveries. The charge-off is recorded as a reduction to notes receivable and a reduction to the corresponding notes receivable allowance.

		Balance at Beginning of Year		Charged to Statement of Operations		Deductions			Balance at End of Year

		(In thousands, continuing and discontinued operations)
Allowance for doubtful accounts
Accounts receivable:
	Year ended June 30, 2009	$	39,309	$	111,723	$	(125,616	)	$	25,416
	Year ended June 30, 2010		25,416		96,565		(94,448	)		27,533
	Year ended June 30, 2011		27,533		98,429		(99,462	)		26,500
Student notes receivable:
	Year ended June 30, 2009	$	9,060	$	45,785	$	(25,667	)	$	29,178
	Year ended June 30, 2010		29,178		67,023		(35,366	)		60,835
	Year ended June 30, 2011		60,835		72,267		(55,256	)		77,846

The effect of an increase in our student notes receivable allowance of 3% of our outstanding earned notes receivable from 50.2% to 53.2% or $77.8 million to $82.5 million would result in an increase in pre-tax loss from continuing operations of $4.7 million as of June 30, 2011. Recoveries for all periods presented are not material.

Included within the Consolidated Statement of Operations, under the caption "Other (income) expense," for fiscal years ended June 30, 2011, 2010, and 2009 is net other income (loss) of $3.3 million, $3.9 million, and ($0.6) million, associated with the Genesis notes program, respectively. The net other income primarily reflects the interest income and loan origination fees, partially offset by costs related to servicing loans. The Company defers and recognizes both the loan origination income and direct loan origination costs as an adjustment to the yield over the life of the related loan. All other lending-related costs, including costs related to servicing fees are charged to expense as incurred.

Generally, a student receivable balance is written off once it reaches greater than 180 days past due.

Although the Company analyzes past due receivables, it is not practical to provide an aging of non-current student receivable balances as a result of the methodology utilized in determining our earned student receivable balances. Student notes receivables are recognized on the Company's consolidated balance sheets as they are earned over the course of a student's program and/or term, and therefore cash collections are not applied against specifically dated transactions.