Education Department data released last month shows that rates at nearly all institutions rose when measured for three rather than two years, as federal law will soon require.  Duh… Yet at 243 colleges, or about 8 percent of the 3,168 degree-granting institutions The Chronicle examined, the three-year rate was at least 15 percentage points higher than the two-year rate, a substantial increase, how is that a surprise???  Of those, 83 percent were for-profit colleges We would wager that most loan portfolios would show an increase in defaults when compared to a longer period of time.

YET, the college showing the biggest gap was Professional Business College, a private nonprofit institution in New York City, where the difference between the two-year rate and the three-year rate was more than 30 percentage points.

Link to article: http://chronicle.com/article/Many-For-Profits-Are/126689/?sid=wb&utm_source=wb&utm_medium=en

Some very interesting data coming in which may lead to the conclusion that the growth rates may be slowing.  While the industry is still growing and at rates which would make most extremely happy, the percentage growth may be showing some signs that it’s leveling out a bit.

Department of Education Conference Call

The (DOE) Department of Education held a conference call on Friday that didn’t really clarify any potential upcoming regulatory changes.

Deputy Undersecretary Robert Shireman basically repeated what was published in The Federal Register.

In essence they intend to convene a committee to develop & propose regulations to maintain and/ or improve program integrity in the Title IV, HEA programs

Shireman did not explain the specific reasons which prompted these meetings, other than wanting students to

have access to college and good quality post-secondary education that serves

students and taxpayers.  He stated a couple of times that the DOE wanted and is seeking input regarding potential changes

The real question is: Is this a lead in opportunity for the Obama administration to come up with significant changes with the ability to say that they were proposed to them rather than taking ownership of leading the charge? 

The good news is that Shireman did not attack the utility of for-profit institutions or their role in providing quality education.

He basically said that there are effective schools and less-effective schools in every sector, so the focus needs to be on quality regardless of sector.

There have been a number of entrants into the online degree space whose tuition are at significantly lower price points than the majors.  Some of these have seen tremendous enrollment growth over the last year to two. In addition, they have remained (in many cases) extremely profitable.  What are your thoughts on these low price providers?  How do you think they will fare long term?  Will they be able to continue to grow with the high marketing/lead costs? 

After speaking with many analysts and marketers it seems like the positive growth is continuing into the second quarter. Lead volume & enrollment growth seem to have continued from the first quarter. Lots of continued interest in investing into the for-profit arena is always a great sign. The only negative area has been the stock prices for many of the public’s. Are you seeing the same continued growth.

Take a look at the EDU stocks, now looks to be a good time to buy in at good prices and at multiples as low as they have been in a while.  With all the bullish discussion of late the EDU sector has taken a hit.  With people/investors being short sighted and thinking, hey if this is the beginning of a recover, we need to get out of those counter cyclical edu stocks now as they will surely go down…  Our thoughts are with what Samuel Clemens once wrote: Let us be thankful for the fools, but for them the rest of us would not succeed!  Sure the sheer volume of the selling and shorting may bring these stocks a little lower, but watch them continue to grow, continue to be profitable, and continue to be strong companies…. and ultimately their stock prices will continue to go higher.

I have heard a few rumors but wanted to see what you think. 2002-2003 was suck a massive year for acquisitions but we haven’t seen a boom year (regarding acquisitions) since. Whose ripe for the picking?  Whens the next roll-up coming out?  There are so many nice mid-sized private for-profit schools out there just lining up for the picking…

For its fiscal second quarter, Apollo Group reported earnings of $0.77 per share, $0.12 better than the First Call consensus of $0.65.

Revenues rose 26.3% year-over-year to $876.1 million, topping the consensus estimate of $865.5 million.

Contributing to the growth was a 20.4% year-over-year increase in degreed enrollment to 397,700.

With all of this good news the stock is down $12.00

 Why?

• Fear of increasing bad Debt
• Fear of increasing marketing costs…even though TV costs are down and online leads have remained consistant
• Fear that growth at this scale cannot continue at this pace
• Fear of management changes…even though that is to be expected with a new leader.

Since bad debt has increased for UoP, the market also pounded ESI as when it comes to bad debt fears, they are the one most feared followed by CECO & COCO.

How bad do you think the bad debt will be?

Feels almost like 2002-2003 again!  If their share prices continue to go up, we know what’s next!  Start up the acquisition machines again.   Hopefully this time around they will take it slow.   It’s good to see the shares of these two companies going up, I hope they both continue on the path of managed growth.