TheBlackPeterSchiff
08-16-2010, 08:24 AM
By MELISSA KORN
More for-profit colleges than expected may be in danger of running afoul of a proposed regulation that would penalize them for graduating students with heavy debt loads.
The U.S. Department of Education on Friday listed the fiscal 2009 loan repayment rates at more than 8,000 for-profit schools nationwide, in an attempt to show some of the rule's potential impact were it to be implemented. Many of them scored poorly, leading to a sell-off in shares of companies with for-profit education businesses.
The proposed rule is intended to measure how well for-profit schools train students for gainful employment in a recognized occupation. It would penalize programs for graduating students with heavy debt burdens—and students who don't land jobs good enough to pay off the debt. Schools could "pass" based on student loan repayment rates, or by maintaining a debt-to-income ratio below a certain percent.
Based on Friday's data, Universal Technical Institute Inc., Grand Canyon Education Inc., American Public Education Inc. and Bridgepoint Education Inc. had the highest repayment rates among publicly traded for-profit schools, all above the 45% threshold. Corinthian Colleges Inc., Washington Post Co.'s Kaplan and ITT Educational Services Inc. were among the lowest performers.
Washington Post Co., whose Kaplan unit had a weighted average repayment rate of 28%, expressed concern Monday about the implications of the department's data. The company said that if program-level repayment rates are similar to the data provided Friday, a significant number of Kaplan schools could become ineligible for federal student aid, which "could have a materially adverse effect on the future results of the Company's higher education division."
The numbers were disputed by some institutions as being based on faulty or unclear calculations.
In Monday morning trading, Strayer Education Inc.'s stock was down 17% to $165.89 while Corinthian Colleges was down 19% to $5.38. Shares of ITT Educational Services Inc. were down 9.8% to $58.03, DeVry Inc. slid 7.4% to $39.60 and Washington Post Co. was down 12% to $303.
While a handful of schools have said they think at least most of their programs would pass the government's proposed hurdles, they've warned that programs designed to allow students to pursue additional education or take on low-paying public service jobs would count as non-repayment under the new rule.
Strayer, which in late July said it believed each of its programs would clear the department's highest proposed hurdle of loan repayment by 45% of graduates, scored a 25% schoolwide. The company had noted last month that it was difficult to measure rates exactly because loan consolidation complicates the measure of deferment or forbearance. The school said on a conference call early Monday that it would file a Freedom of Information Act request to see some of the data on which the Department based its calculations, calling the data "inaccurate," nonsensical" and "arbitrary."
"This discrepancy has significant operational, financial, and public policy implications," Strayer said in a statement issued Saturday. The school had been considered among the most shielded from the proposed rule, with a large portion of its students in bachelor's and graduate degree programs and historically low loan default rates.
"The fact that [Strayer] had among the lowest repayment rates among the publicly held group despite having relatively low cohort default rates leads us to question the validity of this data series," said Jeff Silber of BMO Capital Markets.
http://online.wsj.com/article/SB10001424052748703908704575433232470687928.html?m od=WSJ_hpp_LEFTWhatsNewsCollection
Shoot, I went to ITT Tech. I was able to get a pretty good education too, better than what I got at my traditional university where I was taking weight lifting, music appreciation, etc. A lot of folks that didn't get jobs after going there because they didn't try. They felt like if they just show up, and pass, they will get a job. No, you have to show that you learn the material.
More for-profit colleges than expected may be in danger of running afoul of a proposed regulation that would penalize them for graduating students with heavy debt loads.
The U.S. Department of Education on Friday listed the fiscal 2009 loan repayment rates at more than 8,000 for-profit schools nationwide, in an attempt to show some of the rule's potential impact were it to be implemented. Many of them scored poorly, leading to a sell-off in shares of companies with for-profit education businesses.
The proposed rule is intended to measure how well for-profit schools train students for gainful employment in a recognized occupation. It would penalize programs for graduating students with heavy debt burdens—and students who don't land jobs good enough to pay off the debt. Schools could "pass" based on student loan repayment rates, or by maintaining a debt-to-income ratio below a certain percent.
Based on Friday's data, Universal Technical Institute Inc., Grand Canyon Education Inc., American Public Education Inc. and Bridgepoint Education Inc. had the highest repayment rates among publicly traded for-profit schools, all above the 45% threshold. Corinthian Colleges Inc., Washington Post Co.'s Kaplan and ITT Educational Services Inc. were among the lowest performers.
Washington Post Co., whose Kaplan unit had a weighted average repayment rate of 28%, expressed concern Monday about the implications of the department's data. The company said that if program-level repayment rates are similar to the data provided Friday, a significant number of Kaplan schools could become ineligible for federal student aid, which "could have a materially adverse effect on the future results of the Company's higher education division."
The numbers were disputed by some institutions as being based on faulty or unclear calculations.
In Monday morning trading, Strayer Education Inc.'s stock was down 17% to $165.89 while Corinthian Colleges was down 19% to $5.38. Shares of ITT Educational Services Inc. were down 9.8% to $58.03, DeVry Inc. slid 7.4% to $39.60 and Washington Post Co. was down 12% to $303.
While a handful of schools have said they think at least most of their programs would pass the government's proposed hurdles, they've warned that programs designed to allow students to pursue additional education or take on low-paying public service jobs would count as non-repayment under the new rule.
Strayer, which in late July said it believed each of its programs would clear the department's highest proposed hurdle of loan repayment by 45% of graduates, scored a 25% schoolwide. The company had noted last month that it was difficult to measure rates exactly because loan consolidation complicates the measure of deferment or forbearance. The school said on a conference call early Monday that it would file a Freedom of Information Act request to see some of the data on which the Department based its calculations, calling the data "inaccurate," nonsensical" and "arbitrary."
"This discrepancy has significant operational, financial, and public policy implications," Strayer said in a statement issued Saturday. The school had been considered among the most shielded from the proposed rule, with a large portion of its students in bachelor's and graduate degree programs and historically low loan default rates.
"The fact that [Strayer] had among the lowest repayment rates among the publicly held group despite having relatively low cohort default rates leads us to question the validity of this data series," said Jeff Silber of BMO Capital Markets.
http://online.wsj.com/article/SB10001424052748703908704575433232470687928.html?m od=WSJ_hpp_LEFTWhatsNewsCollection
Shoot, I went to ITT Tech. I was able to get a pretty good education too, better than what I got at my traditional university where I was taking weight lifting, music appreciation, etc. A lot of folks that didn't get jobs after going there because they didn't try. They felt like if they just show up, and pass, they will get a job. No, you have to show that you learn the material.