ForProfit EDU » managing default rates at schools

“Sector Under Siege?”,

EDU Guy — Mon, 14 Jun 2010 17:53:52 +0000

An article with that title was published on the website Inside Higher

Education. In their opinion the gainful employment rule is expected to be excluded from next

week’s education proposal. The article outlines that the Office of Management and Budget

included a note in the Federal Register concluding that the DOE’s proposed program integrity

rules could have a major economic impact, a designation that would require the DOE to

strengthen the evidence necessary to justify the need for the regulation. Furthermore, the article mentions

that the designation is believed to be a major reason why the DOE has (according to reports

from several sources Thursday, though unconfirmed by department officials directly) decided

to omit the gainful employment proposal from the proposed regulations expected to be

released next week. This if the outcome follows the assumption will bring smiles to many of the faces I saw at last

weeks CCA. Lets hope!

Gainful employment, what it can mean to forprofit schools

EDU Guy — Thu, 04 Mar 2010 14:33:18 +0000

During long winded negotiated rulemaking for Higher Education, the US DOE proposed defining gainful employment by establishing a 8% debt to income threshold (debt to income is also commonly used for mortgage limits) based on median student debt for recent college graduates with income based either on Bureau of Labor Statistics 25th percentile wage data or actual college graduate earnings. Loan payments would be based on the standard repayment plan (10 years) for the unsubsidized Stafford loan program. For programs that failed to satisfy this standard, the US Department of Education proposed an alternative that requires a loan repayment rate for recent college graduates of 90%. The loan repayment rate measures the percentage of borrowers actively repaying their loans/ and not defaulting. It is a dual to the default rate, but also includes borrowers who are delinquent, in an economic hardship deferment or in forbearance along with borrowers who are in default.

Mark Kantrowitz has written a piece that’s worthwhile reading. Click the link below to view Marks piece:

http://www.finaid.org/educators/20100301gainfulemployment.pdf

Apollo pre-announced results fiscal 2Q10 results, lowers estimates

EDU Guy — Fri, 19 Feb 2010 14:59:57 +0000

Apollo pre-announced results fiscal 2Q10 results, with EPS from continuing operations lower than our and the consensus estimate. 2Q10 EPS from continuing operations is expected to be $0.77-0.82 versus the consensus estimate of $0.94.

The pre-market announcement apparently is due to

1) higher than expected bad debt expense,

2) greater than expected investments in BP Holdings, the European education company that Apollo recently acquired.

Expected bad debt expense surged well above estimates as a % of revenue of 6.8-7.1%(a ~280 bps increase YoY) is higher than our estimate of 4.7% (a ~60 bps increase YoY). The lower than expected Q2 EPS also reflects a loss per share from BPP Holdings. Apollo has authorized a $500M incrase in the share repurchase program. The size of the share repurchase authorization program is now close to $800M.

The company will hold its 2Q10 conference call on March 29.

ForProfitEDU.com welcomes veteran journalist Andrea Foster

LouDog — Thu, 15 Oct 2009 16:44:30 +0000

ForProfitEDUis proud to welcome future contributions from veteran journalist Andrea Foster. Our relationship with Andrea Foster is a positive step in our continued efforts to provide you with quality industry content. We look forward to the work she will be sharing in the coming months.

Andrea Foster is a veteran journalist whose specialty is education, technology, and Congress. She wrote for eight years about the intersection of academe and technology for The Chronicle of Higher Education, and before that, for The National Law Journal and Congressional Quarterly, among other publications.

commercial career colleges have more success graduating high-risk students than do other types of institutions

onlineedu — Fri, 24 Jul 2009 18:14:39 +0000

For those of us in the industry this is no surprise… We hope other take notice of these FACTS and begin to value the role of the for profits withing the education industry.

Click on the link to read the article at inside highered: http://www.insidehighered.com/news/2009/06/18/career

What ever happened to Apollo’s Billion Dollar International Investment Fund?

LouDog — Mon, 20 Apr 2009 19:57:05 +0000

Remember the press release from 2007 about Apollo’s billion dollar invetment with Carlyle? What ever happened with that?Apollo Group and the Carlyle Group Form $1 Billion Joint Venture to Make Investments in the International Education Services Sector

PHOENIX & WASHINGTON–(BUSINESS WIRE)–Oct. 22, 2007–Apollo Group, Inc. (Nasdaq:APOL) (“Apollo Group” or the “Company”), and private equity firm The Carlyle Group (“Carlyle”), today announced that they have formed a $1 billion joint venture, Apollo Global, Inc. (“Apollo Global”). Apollo Global intends to make a range of investments in the international education services sector. Apollo Global will target investments and partnerships primarily in countries outside the U.S. with attractive demographic and economic growth characteristics. Apollo Group has committed up to $801 million and will own 80.1% of the joint venture. Carlyle has committed up to $199 million and will own 19.9% of Apollo Global. Investments and funding will be subject to approval by the respective investment committees of both Apollo Group and Carlyle. Apollo Global will be a consolidated subsidiary of Apollo Group and Greg Cappelli, Apollo Group’s Executive Vice President and Director will be Chairman of the subsidiary.Commenting on the new venture, Greg Cappelli said, “We are very excited about this new joint venture and our partner, The Carlyle Group. Our core competencies in the education space, combined with Carlyle’s industry relationships and strategic assets across the global education sector, will allow us to successfully capitalize on the tremendous global opportunity that exists in the marketplace.”

Brian Mueller added, “We will continue to invest capital in our high return core domestic business, and through Apollo Global, we will also explore strategic and value creating global acquisition opportunities. Importantly, we reiterate that any investment must meet our disciplined investment criteria as we remain committed to creating long-term value for our shareholders.”

Brooke B. Coburn, Managing Director and Co-head of Carlyle Venture Partners III, L.P., said, “Global demand for higher education is strong. Apollo Group’s operational expertise coupled with Carlyle’s global network make this a powerful partnership.”

The remaining six directors who comprise Apollo Global’s board include Brian Mueller, President and Director of Apollo Group, Peter V. Sperling, Senior Vice President, Secretary and Director of Apollo Group, Roy A. Herberger, Jr., an Apollo Group Director, Jeff Langenbach, Vice President Corporate Development of Apollo Group and Apollo Global’s interim President, Brooke B. Coburn, Managing Director and Co-head of Carlyle Venture Partners III, L.P. and Charles C. Moore, Managing Director on Carlyle’s U.S. Venture and Growth team.

About Apollo Group, Inc.

Apollo Group, Inc. has been an education provider for more than 30 years, operating the University of Phoenix, the Institute for Professional Development, the College for Financial Planning, Western International University and Insight Schools. The Company offers innovative and distinctive educational programs and services at high school, college and graduate levels at 259 locations in 40 states and the District of Columbia; Puerto Rico; Alberta and British Columbia, Canada; Mexico and the Netherlands, as well as online, throughout the world.

For more information about Apollo Group, Inc. and its subsidiaries, call (800) 990-APOL or visit Apollo on the company website at: www.apollogrp.edu.

About The Carlyle Group

The Carlyle Group is a global private equity firm with $75.6 billion under management committed to 55 funds. Carlyle invests in buyouts, venture & growth capital, real estate and leveraged finance in Africa, Asia, Australia, Europe, North America and South America focusing on aerospace & defense, automotive & transportation, consumer & retail, energy & power, financial services, healthcare, industrial, infrastructure, technology & business services and telecommunications & media. Since 1987, the firm has invested $32.3 billion of equity in 686 transactions for a total purchase price of $157.7 billion. The Carlyle Group employs more than 900 people in 21 countries. In the aggregate, Carlyle portfolio companies have more than $87 billion in revenue and employ more than 286,000 people around the world. www.carlyle.com.

Will online masters growth hold up?

LouDog — Wed, 01 Apr 2009 20:06:28 +0000

After speaking with many analysts over the last few months there are two big fears that keep being repeated. The first being bad debt and the other top fear is the continued growth of online Master programs. The main reasons mentioned are potential future cuts by corporations of tuition reimbursement & continued decline in economy, thus affordability of education.

While I have heard of reports indicating that the risk of loosing corporate tuition reimbursement is minimal, are those accurate? Who were polled? HR people, they are usually the last to know.

Will the economy get so bad that people fear they will not be able to afford the monthly out of pocket costs of their tuition along with their rent, car, insurance and food?

The search volume as well as lead volume continue to show strong demand.

What do you think? Are you seeing anything either in support of this or to the contrary?

As expected Apol exceeds expectations, yet analysts still fear

onlineedu — Wed, 01 Apr 2009 19:43:23 +0000

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?

Apollo & their Cohort Default Issue

EDU Guy — Fri, 30 Jan 2009 00:42:27 +0000

Much has been said over the last week regarding apollo and the manner in which they deal with their drops.

A complaint alleges that with regard to students who dropped from their courses shortly after enrolling, University of Phoenix improperly returned the entire amount of the students’ federal loan funds to the lender. Therfore improperly inflating their default rate.

While I disagree with the practice, I do not believe its a door closer… and it’s not another EVCI

others however are much more bearish.

By far the most bearish viewpoint are:

Citron: http://www.citronresearch.com/index.php/2009/01/15/citron-comments-on-apollo-part-2-revenge-of-the-analysts/

and

Seeking alpha: http://seekingalpha.com/article/114648-apollo-group-s-strong-earnings-are-misleading

What do you think?