February 20, 2018

Downturn in foreign student enrollment, causes pain at US Colleges and Universities

drop in foreign students effect us colleges

Just as many universities believed that the financial wreckage left by the 2008 recession was behind them, campuses across the country have been forced to make new rounds of cuts, this time brought on, in large part, by a loss of international students.

Schools in the Midwest have been particularly hard hit — many of them non-flagship public universities that had come to rely heavily on tuition from foreign students, who generally pay more than in-state students.

The downturn follows a decade of explosive growth in foreign student enrollment, which now tops 1 million at United States colleges and educational training programs, and supplies $39 billion in revenue. International enrollment began to flatten in 2016, partly because of changing conditions abroad and the increasing lure of schools in Canada, Australia and other English-speaking countries.

And since President Trump was elected, college administrators say, his rhetoric and more restrictive views on immigration have made the United States even less attractive to international students. The Trump administration is more closely scrutinizing visa applications, indefinitely banning travel from some countries and making it harder for foreign students to remain in the United States after graduation.

While government officials describe these as necessary national security measures, a number of American colleges have been casualties of the policies.

“As you lose those students, then the tuition revenue is negatively impacted as well,” said Michael Godard, the interim provost at the University of Central Missouri, where 944 international students were enrolled in the fall, a decline of more than 1,500 from the previous year. “We’ve had to make some decisions, budgetary decisions, to adjust.”

Link to NY Times Article: https://www.nytimes.com/2018/01/02/us/international-enrollment-drop.html 

Private Equity Investing in Education-Focused Companies Conference Discount

MarketDrivenEDU,  is very pleased to be a partner of The Capital Roundtable for its full-day annual winter conference on “Private Equity Investing in Education-Focused Companies.

Coming up on Thursday, January 25, in New York City, the theme of this conference is
Scouring the Education Industry for Niches Underserved by Investors.

 I’m reaching out to you, as a friend of my group, to offer you a special VIP rate — $500 off the standard rate.  Your price to register is only $995!

Chairing the conference is Atif Gilani, founding partner at Renovus Capital Partners, an education and training-focused private equity firm founded in 2010.

You’ll hear from 20 experienced education company pros who will share their perspectives and lessons learned. These experienced investors will discuss which segments they find most intriguing — like vocational technology, corporate training, pre-K, K-12, and post-secondary.
At this conference, you’ll enjoy exceptional networking opportunities. The agenda includes ample time, with session breaks and a buffet lunch, to exchange ideas, swap business cards, and form new relationships.

 

To register, please call Sarah Burd, at 212-832-7300 ext. 0, or email her at sburd@capitalroundtable.com

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Possible changes to gainful employment signaled by the DOE

Recent discussions from the department of education indicate changes may be in the works.

 

Session 1: December 4-7, 2017

 

Issue Paper #1

 

Issue:                          Scope and Purpose

Statutory cites:           20 U.S.C. § 1221e-3; 20 U.S.C. § 3474; 20 U.S.C. § 1231a; 20 U.S.C. §§ 1001(b)(1), 1002(b)(1)(A)(i), (c)(1)(A); 20 U.S.C. § 1088(b)

 Regulatory cites:       34 CFR § 668.401

Summary of issue:     On October 31, 2014, the Department published final regulations establishing standards and other requirements for title IV-eligible programs that prepare students for gainful employment (GE) in a recognized occupation.   Those regulations went into effect on July 1, 2015.

 

The regulations established an accountability and transparency framework for GE programs.  The accountability framework conditions the eligibility of a GE program based on (1) the program’s performance under a debt-to-earnings (D/E) rate measure and (2) the institution’s certification that the program meets certain accrediting agency and State requirements.  The transparency framework provides students, prospective students, and their families with accurate and comparable information about a GE program to better inform their educational and financial decisions about enrolling or continuing in the program.  Finally, the GE regulations included reporting requirements to provide the Department with information required under both the accountability and transparency frameworks.  In adopting the accountability framework, the Department acted under its authority under sections 101, 102, and 481(b) of the HEA, which pertain solely to GE programs, among other authorities.  The Department also relied on its broader authority under the General Education Provisions Act and the Department of Education Organization Act.

 

A common criticism of the GE regulations is that one of the problems the rules aim to address—students being saddled with unaffordable levels of loan debt in relation to their earnings—is an issue across all institutions, and not just those that offer GE programs.  In addition, some have argued that many of the factors contributing to poor student outcomes, as measured by the D/E rates, are outside of the control of an institution.  Accordingly, some have suggested that the regulations should apply to all programs, not just GE programs, and that the loss of eligibility resulting from poor D/E rates is unfairly punitive.  Critics have also argued that the reporting and compliance requirements are overly burdensome.

 

In the issue papers that follow, we discuss in detail the individual components of the GE regulations.  Here we address broad issues of scope and purpose of the regulations.


 

Questions for consideration by the committee:

  • Should the regulations apply, in whole or in part, to all programs or just GE programs?
  • Should the Department retain, amend, or eliminate the accountability framework?
    • Should the Department retain, amend, or eliminate the D/E rates? For all programs or just GE programs?
    • If retained or amended, should the D/E rates measure be used to determine eligibility, result in other sanctions (e.g., warnings or other enhanced disclosures), and/or be used as a disclosure? If retained or amended for purposes of disclosure, should this pertain to all programs or just GE programs?
    • Should the Department retain, amend, or eliminate the certification requirements? For all programs or just GE programs?
  • Should the Department retain, amend, or eliminate the transparency framework? For all programs or just GE programs?
    • If D/E rates are removed from the accountability framework, should D/E rates be used for disclosures under the transparency framework?
  • Are program disclosures alone effective in helping enrolled and prospective students identify lower-performing programs with respect to job earnings?

 

Articles on this topic:

https://www.insidehighered.com/quicktakes/2017/11/30/education-department-signals-possible-changes-gainful-employment-rule#.Wh_84Y-jBFo.linkedin

https://www.wsj.com/articles/house-gop-to-propose-sweeping-changes-to-higher-education-1511956800

Capella & Strayer tie the Knot!

capella and strayer merge

Strayer Education Inc. and Capella Education Co. announced Monday they are merging, in a $2 billion deal that will make the combined company one of the largest for-profit college operators in the country.

Shareholders in Herndon, Va.-based Strayer will own 52 percent of the combined company’s stock, while Capella investors will hold the rest. Both boards have voted unanimously for the deal, which the companies anticipate will close in the third quarter of 2018. They will need state and federal approvals, including a thumbs up from the Department of Education.

Neither Strayer nor Capella has endured the legal headaches of some of their competitors, yet tepid growth in the number of people seeking degrees remains a hurdle — but one that investment analysts say the combined companies may be able to overcome.

Link to article: https://www.washingtonpost.com/news/grade-point/wp/2017/10/30/for-profit-college-operators-capella-and-strayer-join-forces-in-a-2-billion-merger/?utm_term=.2e826d6c5d1a 

 

Analysis of the proposed merger by Trace Urdan:

In the all-stock transaction as described, CPLA investors will receive 0.875 STRA shares and own 48% of the combined company post-merger. On a combined basis the new company will offer 135 degrees and certificate programs to more than 80,000 students. Its revenue will approach $900 million annually, its EBITDA will approach $130 million and its distributable free cash flow will be approximately $80 million. Its implied equity value will be roughly $1.9 billion.

The new entity will combine back office operations and share best practices, but each academic institution will be separately and independently maintained and operated. Pending approval by the U.S. Department of Education, each of its accreditors (HLC and Middle States) and various state regulatory entities, it expects to close the transaction within the next eight months. The new parent company will change its name to Strategic Education and retain the STRA ticker.

Link to full analysis:

https://www.linkedin.com/pulse/chocolate-bars-vs-candy-corn-sorting-strayer-capellas-trace-urdan/?trackingId=dRoiTGJ4KKEI1VdwCq%2FWaQ%3D%3D

DOE Will Allow Two Large For-Profit Colleges To Become Nonprofits

US Department of Education

The Education Department has offered its stamp of approval for the controversial sale of two massive for-profit colleges, Kaplan University and the Art Institutes, according to emails obtained by BuzzFeed News — allowing both schools to convert to nonprofit colleges. Kaplan, which was purchased by Purdue University, will become a public college.

The two high-profile conversions have been closely watched by the for-profit education industry, which sees them as a bellwether for future attempts to convert to nonprofits. More and more for-profit colleges have been eyeing conversions as the industry continues to struggle to enroll students.

But there were questions about whether conversions would be allowed by federal overseers. The Obama administration had begun to block such deals over concerns that schools would not actually operate as nonprofits, independent from the for-profit entities that once owned them. There were also worries in and out of the administration that nonprofit conversions were being used to evade regulations.

 

Link to article: https://www.buzzfeed.com/mollyhensleyclancy/the-education-department-will-allow-two-large-for-profit?utm_term=.ojznP2Dyy0#.kn14qB2PPN

 

Are changes in Title IX coming?

Betsy Devos for profit education

 

Wednesday, the U.S. Education Department confirmed that the education secretary, Betsy DeVos, would appear at George Mason University on Thursday to make a “major policy address on Title IX enforcement.” That announcement, previously reported by BuzzFeed News, heightened advocates’ fears that Ms. DeVos was poised to roll back the department’s efforts on mitigating campus sexual assault, a hallmark of the Obama years.

BuzzFeed had also reported that the department’s top civil-rights official, Candice Jackson, intended to revisit the department’s 2011 “Dear Colleague” letter — a directive that laid out exactly what the government expected colleges to do to protect students from sexual violence — through a process called notice and comment.

Link to article: http://www.chronicle.com/article/A-DeVos-Speech-on-Title-IX/241108 

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Devos to potentially roll back Gainful employment and borrower repayment policies

devos gainful employment

DeVos Will Roll Back 2 Obama Regulations, a Blow to Consumer Advocates – The Chronicle of Higher Education.

The U.S. Department of Education is beginning the process of rolling back two Obama-era regulations aimed at holding for-profit colleges accountable and helping students who may have been misled or defrauded by them: the borrower-defense-to-repayment regulation, which was scheduled to go into effect on July 1, and the gainful-employment regulation, which was already in effect.

The gainful-employment regulation was meant to hold career-preparation programs accountable for the outcomes of their graduates. Specifically, if the estimated loan payments of a program’s graduates exceed a certain percentage of their income over a period of years, then the program would risk losing federal student aid.

The industry is finally feeling some relief

Link to Chronicle article:  http://www.chronicle.com/article/DeVos-Will-Roll-Back-2-Obama/240337?cid=wsinglestory_hp_1

 

Purdue University acquires Kaplan Online and 15 Campus locations for $1.00

In essence another for-profit to non-profit conversion of sorts.  Interesting way for Purdue to get into the online education sector.

Arlington-based Graham Holdings Co. has sold off its Kaplan University business — and its hundreds of millions in revenue — to Purdue University for just $1.

The deal will place the for-profit education systepurdue acquires kaplan universitym into a new nonprofit structure managed by West Lafayette, Indiana-based Purdue. The nonprofit will pay Graham to operate Kaplan University under a 30-year contract, but the nonprofit has the option to buy out that contract after six years.

Graham Holdings will also receive a share of the revenue generated from the new operation, but its too early to estimate how much that will be because it will be based on future revenue minus expenses.

The for-profit education system has faced several challenging years under the Obama administration, and many companies like Kaplan have been affected.

“I think we have built a very solid business over time. The reality of this is that it has been challenging. Why not put our two forces together and figure it out?” said Pinkie Mayfield, Graham Holdings vice president and special assistant to the chairman, in an interview. She said it would have taken Purdue years to build the type of functionality that Kaplan has been able to with its university system.

Kaplan Higher Education generated $617 million in revenue in 2016, so it represents a big chunk of Graham’s overall revenue, which was $2.5 billion in 2016.

 

link to article: https://www-bizjournals-com.cdn.ampproject.org/c/s/www.bizjournals.com/washington/news/2017/04/27/purdue-universitypaid-just-1-up-front-for-graham.amp.html 

Interactive Map showing free college opportunities by state

free college

College Promise Programs

Over the last decade—but especially in the past few years—programs with the “promise” label have been advanced at local, state, and federal levels. These programs are designed to increase college attainment in particular places. The Kalamazoo Promise program, created in 2005, inspired similar programs in economically disadvantaged communities in Michigan and other states. Researcher Michelle Miller-Adams and others at the W.E. Upjohn Institute for Employment Research label these programs “place-based scholarship programs,” defined as programs that provide “universal or near-universal access” to financial support for college based on where students reside (e.g., school district or city) or whether they attend specified schools.

Link to article: http://ahead-penn.org/creating-knowledge/college-promise

Link to Map: http://www.whimsymaps.com/view/collegepromise

 

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