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Some Relief, But For-Profit Colleges Still Face Challenges

--Regulations, public scrutiny will continue to pressure for-profit colleges --Political gridlock in Washington leaves many uncertainties --Tuition, default rates to remain in focus By Melissa Korn Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Investors in for-profit colleges breathed a collective sigh of relief last week when the U.S. Department of Education released a softer-than-expected regulation addressing concerns about student loan rates. But the schools aren't out of the woods yet. They still face the looming expiration of an allowance to get more revenue from federal student aid sources. Continued pressure to improve admissions standards and graduation and loan-repayment rates are also expected to hurt earnings for some time to come. Last week, the Department of Education issued the final version of its so-called "gainful employment" rule, intended to ensure vocational programs actually prepare students for jobs. Programs could lose eligibility for federal financial aid if their students' debt burdens prove too high. Shares of the schools, including Education Management Corp. (EDMC), Strayer Education Inc. (STRA) and Corinthian Colleges Inc. (COCO), moved sharply higher the day the rule was released, as they stand less chance of losing access to the funds. Still, the stocks remain well below their 52-week highs. Given the continued pressures, some say multiples may not return any time soon. The next major test for the industry will come on July 1, when a hard ceiling on how much of their revenue the schools can derive from Title IV federal aid--90%--is reinstituted. When federal loan limits were increased in 2008, Congress provided an exemption that allowed them not to count that additional money toward the 90%. Sen. Tom Harkin (D., Iowa), who heads the Senate Committee on Health, Education, Labor and Pensions, is in favor of letting the exemption expire and is angling to count military-education benefits toward the 90% in future calculations. Schools are lobbying hard for an extension. "It's tough to see how the stalemate breaks," said Jarrel Price, an analyst at Height Analytics in Washington, D.C. If it does, though, "the question is what the industry will have to give up to get that relief." Schools that rely significantly on Title IV funding and military-funded aid--including Corinthian, American Public Education Inc. (APEI), Bridgepoint Education Inc. (BPI), Apollo Group Inc. (APOL) and Washington Post Co.'s (WPO) Kaplan--stand to suffer most, Price said. The Education Department will begin an experiment soon allowing schools to limit the federal aid their students accept, but it will be "nowhere near large enough to have an effect on one of these big schools' bottom-line 90/10 ratio," said Deputy Undersecretary James Kvaal. Meanwhile, schools could lose access to other federal aid through no action of their own. The fiscal 2012 budget may include cuts to the under-funded Pell Grant program, reserved for the neediest students. The Obama administration has fought hard to keep the maximum grant at $5,550, but some in Congress expect the limit to be lowered. Corinthian derived nearly 29% of revenue from Pell grants in the 2009-2010 year, while Bridgepoint brought in 27.5% of its revenue from that source, according to Price. Lincoln Educational Services Inc. (LINC), Universal Technical Institutes Inc. (UTI), Kaplan and Apollo also rely heavily on Pell funds. Even if student funding is kept intact, the number of students enrolling is declining. For-profit colleges have reported falling new-student start rates as the schools tighten admissions standards to comply with additional Department of Education rules. Schools can expect more oversight by accrediting agencies, too, after those groups were criticized for shirking their responsibilities. An accreditation oversight group is expected to issue a series of recommendations later this year. Also, attorneys general in Florida, Kentucky, New York, Massachusetts and elsewhere have launched investigations into the business practices at campuses operated by companies including Washington Post, Apollo Group and Corinthian Colleges. -By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

Stock News for Bridgepoint Educatio (BPI)
DateTimeHeadline
05/12/201408:58:08U.S. Hot Stocks: Hot Stocks to Watch
07/11/201309:14:35U.S. HOT STOCK FUTURES: HOT STOCKS TO WATCH
06/09/201113:46:46Some Relief, But For-Profit Colleges Still Face Challenges
06/02/201109:48:46For-Profit Colleges Rally As Government Test Looks Easy
06/02/201100:31:23US Education Dept Softens Final Rule On Vocational Programs
03/02/201117:42:12Washington Post's Kaplan Being Investigated By Illinois AG
01/25/201111:54:59US Education Department To Clarify Controversial Regulations
12/15/201018:01:51Kentucky Attorney General Probing Six For-Profit Schools
10/28/201000:28:25US Education Dept Releases Higher Education Rule Package
09/30/201014:15:28Sen Harkin To Propose Legislative Changes To For-Profit Colleges
09/23/201014:25:22Education Dept To Set Timeline For Higher-Ed Regulations Friday
08/16/201013:12:08CORRECT: For-Profit Schools Could See Bigger Hit From Debt Rule
08/16/201008:30:13For-Profit Schools Could See Bigger Hit From Student Debt Rule
07/23/201000:28:11U.S. To Scrutinize For-Profit Career Colleges
05/20/201009:29:37Bridgepoint Education To Produce Its Own Online Texts
05/13/201017:16:51CORRECT(3/24):College Investors Bank On Gainful Employment Rule...
03/24/201012:17:04College Investors Bank On Gainful Employment Rule Easing
03/03/201014:30:20CORRECT: For-Profit Colleges Capitalize On California Education...
03/03/201013:19:07For-Profit Colleges Capitalize On California Education Woes

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