July 30, 2014

Obama signs Executive Order on Financial Aid Student repayments

Obama_signingIn an attempt to ease crushing student debt, President Obama will sign an executive order Monday afternoon that will allow at least 5 million people to cap their student loan payments at 10 percent of their income.

Obama will direct Secretary of Education Arne Duncan to amend student loan regulations to allow for the payment ceiling, which the administration wants to make available to borrowers by December 2015.

 

Link to Articles:

http://chronicle.com/article/As-Congress-Bickers-Obama/146977/?cid=at&utm_source=at&utm_medium=en

http://www.washingtonpost.com/blogs/post-politics/wp/2014/06/09/obama-to-sign-executive-order-capping-student-loan-payments/

 

Time to Decouple Accreditation from Federal Funding?

accredited

By Jay Schalin

It often appears as if the country’s six regional accrediting agencies are the federal overseers of all things higher education. It’s time to put an end to their expansive role; doing so would very likely set off a great chain of positive reform. This is especially important now, as Congress is getting ready to update and reauthorize the Higher Education Act, which governs accreditation, in 2014.

The six agencies are the Middle States Association of Colleges and Schools (MSACS), the New England Association of Schools and Colleges (NEASC), the Western Association of Schools and Colleges (WASC), the Southern Association of Colleges and Schools (SACS), the North Central States Association of Colleges and Schools (NCA), and the Northwest Commission on Colleges and Universities (NWCCU).

They provide a seal of approval—accreditation—that indicates schools are meeting minimal industry standards. Primarily, they ascertain that the colleges and universities are financially sound and function as educational institutions and not merely as  “diploma mills.”

The agencies’ main source of power is their ability—granted by the original Higher Education Act in 1965—to determine whether schools are eligible for federal funding, particularly the student financial aid that is the life’s blood for private institutions. That role has permitted the agencies to make the transition from essentially trade organizations intent on cooperatively improving industry practices—as they were originally conceived—to quasi-governmental regulatory bodies with the authority to impose huge costs, policy shifts, and penalties.

Allowing the regional agencies to continue as they are will likely continue higher education’s slide into mediocrity and dogmatic conformity. They currently impose burdensome costs and regulations, stifle innovation, discourage competition and, most egregiously, allow substandard schools to continue operations while sucking up massive amounts of federal aid.

Full article: http://www.popecenter.org/commentaries/article.html?id=2934#.U44pUPldWa8

Education Services Report from Baird

baird

Interesting report from Baird on the Education Services sector.

Despite lingering macroeconomic pressures from the Great Recession, the global education industry continues to benefit from favorable, long-term secular trends. Population growth in most developed nations, combined with a continuing shift from industrial to service-based, knowledge economies will drive demand for greater educational attainment. As the public sector struggles with funding challenges, aging infrastructure and generally disappointing student outcomes, nimble, technology-enabled content and service providers, which can efficiently deliver high quality solutions, stand to benefit. The following section highlights selected recent/current trends and important news and events within each of the identified education sub-sectors.

Link to full report: 

http://www.rwbaird.com/SharedPDF/emailTemplates/InvestmentBanking/Edu_Report_Spring2014International_vF.pdf

 

Capella Growth on Growth Is Finally Here; New Enrollment Results and Guidance Solid

capellaGrowth on Growth Is Finally Here; New Enrollment Results and Guidance Solid

• Stock thoughts: A solid first quarter was highlighted by starts growth on a positive starts comp for the first time in 14 quarters. This result was particularly impressive because it was accomplished at a lower year-over-year cost of student acquisition (marketing and admissions spending per new enrollment).
• Perhaps even more importantly, management guided to midsingle-digit starts growth in the second quarter on a 12.7% starts growth comp, implying two-year starts growth of nearly 20%, a demand growth rate that is at or above the high end of the sector.
• Instructional costs per enrollment rose slightly and operating margins were within the guided range but 40 basis points below consensus estimates. We believe operating leverage remains very strong, but the company is reinvesting a bit in new delivery methods like Sophia and Flexpath, products that should drive demand in 2015 and beyond. We also note that the company delivered very strong recurring operating margin guidance of 16.5% to 17.5% in the second quarter, 20 basis points above consensus and a 260-basis-point expansion year-over-year at the midpoint.
• All of this was accomplished with sector-leading retention and retention improvement. Capella appears to have built a better mousetrap and has virtually no policy concerns because of its strong student outcomes and high-quality working adult demographics, allowing it to operate with fewer constraints than other providers in the postsecondary group. We do not believe the current valuation reflects this perspective; we remain strong buyers and reiterate our Outperform rating.
Link to Full Report: https://www.rdocs.com/getrdocnologin.asp?p=148119&zId=46652

 

Timo Connor, CFA

William Blair www.williamblair.com

New Gainful Employment proposed rules released:

gainful employmentNew Gainful Employment proposed rules released:

  • Programs must pass the following metrics to maintain federal financial aid eligibility:
    • The estimated annual loan payment of graduates cannot exceed 20 percent of their discretionary earnings or 8 percent of their annual total earnings; and
    • The programmatic cohort default rate cannot exceed 30 percent for 3 consecutive years.
  • The Department did modify 2 variables in the debt-to-earnings calculation:
    • 30 students must complete the program; the previous version only required 10; and
    • The amortization schedule is now 10 years for certificate and associate degree programs, 15 years for bachelor’s and master’s degree programs and 20 years for doctoral and first professional programs; the previous version provided a 10 year period for all programs.
  • Institutions must certify that all gainful employment programs meet applicable accreditation requirements and state or federal licensure standards.
  • Institutions must publicly disclose information about the program costs, debt, and performance of their gainful employment programs so that students can make informed decisions.

 

Link to Proposed Gainful Employment Rules: https://www2.ed.gov/policy/highered/reg/hearulemaking/2012/notice-proposed-rulemaking-march-14-2014.pdf  

2014 Annual EDU Advertising & Marketing Survey for Schools, Lead Providers, Call Centers & Agency’s You MUST participate to receive results!

2014 EDU advertising surveyIt’s that time, ForProfitEDU Industry Group’s 4th annual survey, in conjunction with Edufficient, one of the fasting growing EDU-specific Performance Marketing Agencies.

This survey has become a standard for the industry, bringing together Schools, Lead Providers & Agencies, helping to create an updated master list of industry service providers.

Link to survey: https://www.surveymonkey.com/s/2014edufficientforprofitedusurvey

Hundreds of screened participants help make this a valuable tool for all those who participate.

  • All participants are reviewed for accuracy & relevance to the industry.

 

  • You must complete 75% of the survey questions to qualify and receive results!

 

  • All requests for survey results from non-participants will be denied!

Service providers contact information must be accurate to qualify. Remember, schools will receive your contact information so they can contact you, so please double check for accuracy.

All School contact information (school name, your name, phone & email) is private and will not be distributed. Only vendor info will be made available.

Link to survey: https://www.surveymonkey.com/s/2014edufficientforprofitedusurvey

Between 2002 and 2010, the number of students enrolled in online courses throughout the U.S. grew 283 percent — from 1.6 million to 6.1 million

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The number of students in the United States enrolled in at least one online course has increased faster than overall enrollment growth in higher education, a new report from the state Comptroller’s office shows.

The report, released today by the Comptroller’s Offices of Research and Education Accountability (OREA), found that between 2002 and 2010, the number of students enrolled in online courses throughout the U.S. grew 283 percent — from 1.6 million to 6.1 million. Nearly one-third of all higher education students took at least one course online in 2011.

Link: http://www.dnj.com/article/20140129/NEWS/301290016/New-report-chronicles-growth-online-learning-higher-education?nclick_check=1&utm_source=linkedin&utm_medium=social&utm_content=3632454

 

LeadsCon Las Vegas 2014: Last Days to Save. Spotlight on Speaker David Pauldine President of Devry.

leadsconLeadsCon Las Vegas 2014: Last Days to Save. Spotlight on Speaker David Pauldine.   

This is it. The last few days day to SAVE $250 and take advantage of this exclusive $595 Partner Rate for LeadsCon Las Vegas 2014 (March 25 & 26, 2014 – The Mirage Resort & Casino).   Beginning Friday, January 10th, this offer will expire and rates will jump to $845. Book today using THIS LINK so you don’t pay more than you need to.  Please note that you must use the ID Code (LV14) and Apply to get the discount rate. 

Speaker David Pauldine Examines Online Education 
David Pauldine, President, DeVry University will be speaking on our “It’s All About the Jobs: Where Online Education and Placement Cross Paths“ session!  David will not just be focusing on examining the front-end customer acquisition, but also associating it with the positive outcome at the end of the funnel, which is getting the student educated and finding job placement for them. Learn more about David: http://bit.ly/1jXlM1h 

Looking for more great content? View the Full Conference Program.

Visit www.leadscon.com for more information

Discounted access to conference on Private Equity Investing in For-Profit Education Companies Only offered to For-Profit Education Industry Group Members

capital roundtableWe’re pleased to offer discounted admission to ForProfitEDU members at a preferred rate of $400 less than the standard rate.

The Capital Roundtable is presenting a full-day conference on Private Equity Investing in For-Profit Education Companies.
Date: Thursday, January 16, 2014
Time: 8:00 am to 5:00 pm

Place: The New York Athletic Club (180 Central Park South, New York, NY)

If you are interested in attending, act fast as these usually get sold out fast. The last conference had record attendance.

For The Discounted rate you MUST Contact:
Hallie Watson phone: 212.832.7300 or email hwatson@capitalroundtable.com

Discounted access to conference on Private Equity Investing in For-Profit Education Companies Only offered to For-Profit Education Industry Group Members conference date: 01/16/14

Link to event info: BUT you MUST use email or phone above for discount!!!
http://www.capitalroundtable.com/masterclass/Capital-Roundtable-Private-Equity-Education-Conference-2014A.html

No Resolution for Gainful Employment, as Expected

ed_mn_logoUpdate from William Blair’s Timo Connor

• On Friday, December 13 the final Gainful Employment 2.0 hearing ended with no
resolution, as expected. With no consensus from negotiators on what the rules
should look like, the Department of Education (ED) will proceed unilaterally in
publishing final rules. The ED has until November 2014 to get them published in
the Federal Register in order to go effective in 2015.
• We believe recently released draft rules will be weakened significantly in the
final version, much like they were when Gainful Employment 1.0 rules were
published in 2011 (e.g., debt-to-income thresholds were increased from 8% to
12%).
• We believe that no matter what the final rules look like, they are likely to face
significant legal and legislative challenges from the industry and legislative
supporters of the industry. We note that Gainful Employment 1.0 rules were
challenged in court, and a federal judge struck down the rules on the basis that
some of the quantitative thresholds were “arbitrary.” We also note that a
Republican House is largely supportive of the private-sector colleges and could
mount a legislative challenge of gainful employment through the ongoing Higher
Education Act reauthorization process or through the budget process by
challenging the funding of ED.

In addition, gainful employment data is reported on a multiyear lag, and we
believe that significant changes to improve student ROI made by private-sector
schools over the past few years will greatly improve regulatory metrics over
time. While we continue to expect regulatory scrutiny of the sector, a gradually
narrowing range of potential negative regulatory outcomes should support
multiple expansion for the postsecondary stocks in the coming years.

Recapping the Gainful Employment Process
ED held a series of Negotiated Rule-Making hearings this fall discussing draft gainful employment rules. The first three-day
session began Monday, September 9, the second three-day session began November 18, and the third and final one-day
session took place on December 13.
• The previous iteration of the rule, finalized in 2011, was challenged by an industry group and vacated in 2012 by a
federal judge who found the metrics “arbitrary,” so ED was forced to start the process over. Because no consensus was
reached by the negotiating panel, ED will move forward with new rules, which would likely go into effect in 2015,
potentially eliminating Title IV student loan eligibility for programs at some schools in 2019 and beyond.
• The draft language, though very similar to the prior rule, appears more onerous for the sector this time around;
however, the initially proposed rules from the previous gainful employment NegReg were watered down significantly
in the final language, with debt-to-income ceilings rising from 8% to 12% and repayment floors falling from 45% to
35%, for example.
• In particular, the use of “and” rather than “or” forces the schools to pass all metrics, not just one; the re-introduction
of a “caution zone” for programs close to failing; the elimination of an extended debt amortization schedule for
bachelor’s and graduate programs; and the elimination of a transition period in which generally higher BLS incomes
could be substituted for actual earnings are negative changes for the schools in the space. The table at the end of this
note offers the details on the new rule and the school’s debt-to-income and CDR exposures.

• The schools have already begun adapting to potential rules by freezing or cutting tuitions or the number of credits
required for graduation as well as reducing exposures to low-salary fields like criminal justice or certain fine arts
studies, while also screening out unprepared students who are more likely to default or not repay loans. As a result,
we believe regulatory metrics will likely improve in the years leading up to the instatement of any potential rules.
• We believe the political climate has shifted significantly since the gainful employment NegReg process began in 2009,
and believe there is more political support for the private-sector schools, particularly among Republicans, who now
view further ED regulations as anti-business. Although NegReg remains a non-legislative process, Congress controls
funding for ED, and we believe the rules are significantly more likely to be softened than toughened following this
fall’s sessions and the ensuing public comment period. We also note that the schools successfully appealed the prior
rules and are likely to appeal again, so it could be a lengthy process to put the rules in place (if they’re put in place at
all).
Source: Timo Connor, CFA William Blair & Company, L.L.C. Link to report

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