24 September 2009
Ashford News Roundup 09-24-09
Posted by Connor under: Clinton; Economics .
Yesterday I posted a rant on Aww Martha on the Clinton Herald’s lack of decent news coverage of local major businesses. There really is no excuse because setting up Google News alerts is so simple. So, I did just that for some of the local major businesses. I set it for weekly digests.
Instant payback. Here is what’s going on with Ashford/Bridgepoint this week. First the Good News:
Respected business and investing site Seeking Alpha lists Bridgepoint Education as its number one IPO of 2009 so far.
Since turning its first yearly profit in 2007, this provider of online education to over 30K students has been on a tear. In 2008, its EPS rocketed to .51/share vs just .06/share the year before and here in 2009 it’s expected to double to a little over a buck a share. Sales growth has been equally impressive with quarter over quarter growth in the last 4 quarters of 183%, 175%, 163% and 127%. Technically, it’s in the process of carving out a new base after more than doubling from opening
Now the Bad News:
Congress is contemplating hearings regarding for-profit universities following a Government Accounting Office report that indicates a much higher default rates of federal student loans among the for-profits.
Rep. George Miller, D-Calif., who heads the House Education Committee, said Monday after the market closed that a Government Accountability Office report on so-called proprietary schools is “extremely troubling and warrant(s) further examination by Congress.”
The GAO report, released earlier this week, found loan default rates of students who receive Title IV money to attend proprietary schools exceed the default rates of students who receive federal money to attend conventional college-level institutions.
The report found that many proprietary schools admitted unqualified students who had a greater tendency than other students to drop out, let students stay enrolled despite a lack of academic progress and also misrepresented themselves to prospective students.
I have looked over the GAO report. The profile of the student body at for-profit schools skews much more towards the non-traditional student. That is, over 25 and financially independent (not getting funds from mom and dad). This is the underserved market that these schools are targeting, so this should not be surprising. For-profits offer Internet-based education that is suited for the needs of this segment.
It should also not be surprising that this segment of students fails to complete the coursework at a higher level than traditional college students. When you are probably already struggling a bit to make ends meet it is going to be comparably much more difficult to successfully complete a two or three year commitment to an online education. Life will get in the way.
Here is a chart from the GAO report:
With that said it is also pretty clear that the default rate differences are pretty startling. With more and more students looking towards the for-profit option those schools need to do a better job of helping them be successful.
The tension here is between the government’s fiduciary duty to the taxpayers who guarantee the student loan program and companies fiduciary duty to deliver profits to the shareholders. The government needs to see to it that federal student loans a) go to students who can succeed and, b) that those loans are paid back so that the system can remain solvent. The universities don’t necessarily care if those loans are paid back. Once a tuition bill is paid, the money is in the company account. The loan company is on the hook.
You couldn’t ask for a clearer example of the need for government oversight of business than this. Without it, there would be very little in the way of incentive — other than a desire to have good student outcomes for competitive reasons, and that can be fudged easily — to ensure that their students succeed and go on to get good jobs and pay back the loans.
BPI closed yesterday at $16.65 a share, down 55 cents.