Slow Time at the Apollo

• Report this Comment On January 11, 2011, at 2:34 PM, Jehoiadason wrote:

  Hi Rick,

  I greatly enjoy your work.

  I recently sent a for-profit universities' ("FPU") report to one of your contemporaries at the Fool, Brian Stoffel. I spent a significant amount of time this fall sifting through the financials, published reports, analyst presentations, earnings calls, and articles/speeches written/made by various industry tangents (detractors and advocates). I then made significant investments in APOL, COCO, and ESI.

  In my opinion, the attack on the FPUs has been highly trumpeted by opportunistic short-sellers and a sensationalist press. The negative attention has been derived from a few "bulletin board" statistics that in and of themselves don't paint the whole picture of the industry. I would encourage anyone who is interested in the future of education, and its role in the global competitiveness of our workforce, to perform their due diligence and consider the points from all sides before casting aspersions on the whole for-profit industry.

  To this end, and for balance, I would recommend reading the Education Trust Nov. 2010 report entitled: “Subprime Opportunity: The Unfulfilled Promise of For-Profit Colleges and Universities” (the most concise detractor report I have found), and then I would read the Apollo Group's Aug. 2010 report entitled: "Higher Education at a Crossroads" (compelling points from industry advocates).

  One surprising anecdote from my research is that there is signficant bipartison support for the industry. Democrats like Lanny Davis (former Special Counsel to President Clinton), Sen. Bill Nelson (FL), and Reps. John Spratt (SC) and Debbie Wasserman Schultz (FL) have joined a basically party-line position held by the Republicans. It is interesting to point out that Civil Rights legend and current GA Congressman, John Lewis, a Democrat, recently gave the commencement address to the FPU member Strayer University 2010 graduating class. Further, according to a recent Bloomberg article, the Congressional Black Caucus is defending FPUs having “signed letters to the Education Department this year, saying the gainful-employment rule would hurt minority students”.

  I will close with just a few more nuggets to consider:

  Robert Silberman (CEO of Strayer University) in his Aug. 24, 2010 Washington Post Op-Ed:

  “Undoubtedly, there are some investor-funded universities that fail in their academic mission, just as some traditional nonprofit universities do. But such failure is the fault of the administrators and governing bodies of those institutions, not the source of their capital”.

  “Strayer University is regionally accredited by the Middle States Commission on Higher Education, which also oversees Georgetown University, Princeton University and the University of Maryland. This means that Strayer’s instructional methods, curriculum, faculty and academic policies are subject to extensive scrutiny.” [All the reputable FPUs have either a regional or national accreditation by a similarly recognized commission by the Dept. of Ed]

  Harris Miller (president of the Association of Private Sector Colleges and Universities) in a Sept. 10, 2009 CityTownInfo.com article:

  “’People aren’t really that stupid,’ said Harris Miller, president of the Career College Association in Washington, DC, who was quoted in the Sentinel. ‘If they thought they could get the same education at the community college for $3,000 that they’re getting at the career college for $10,000, they’d go to the community college.’” [The 2 year degree graduation statistics comparison between FPUs and community colleges, as shown in the Education Trust report cited earlier, certainly supports this position - the FPU rate is much higher than that of community colleges]

  Mr. Miller in a Nov. 25, 2010 New York Times letter to the editor:

  “The Education Trust report… unfairly criticizes the career education sector and devalues the education and commitment of its 3.2 million students. Comparing private sector colleges and universities to other types of institutions does not consider the larger percentages of high-risk students we serve. When the graduation rates of lower-income students and those with other ‘risk factors’ are compared across not-for-profit and for-profit institutions with similar demographic profiles, the results favor career colleges, not traditional schools.”

  Thomas Kean (governor of NJ, 1982-1990; president of Drew University from 1990-2005; chairman of 9/11 Commission) in a Nov. 29, 2010 article at Politico.com:

  “America’s higher education system strives to serve a diverse group of students, each with different interests and needs. As we confront Obama’s challenge, the last thing we would want are the unintended consequences of regulations, which have not been carefully examined, harming any effort to reach that goal.”

  Lanny Davis (former Special Counsel to President Clinton) in a Sept. 23, 2010 article posted on the Huffington Post:

  “Let’s be careful about characterizing, as some liberals have done, those schools catering to such vulnerable at-risk students with ‘open admission’ policies as ‘bad actors’ whereas the more selective elitist Harvards and Stanfords with less student loan defaults are deemed ‘good actors’.”

  “According to the Department of Education’s own data released last month, its proposed ‘gainful employment’ regulations are so poorly crafted that if applied to non-profits too (which they are currently not), Harvard Medical School, D.C.’s famous minority school, Howard University, and 93 or 100 Historic Black Colleges in the U.S. would all fail the so called loan repayment test.”

  Harry C. Alford (president and CEO of the National Black Chamber of Commerce) in a Sept. 13, 2010 article posted on www.npr.org:

  “While the for-profit college industry — as with any sector — has bad actors, the Department of Education's blanket fix is shaping up to do more harm than good. Student debt is a national problem, one that must be addressed, but imposing regulations on schools that are effectively educating students is unnecessary.”

  “As America's traditional businesses remain very wary of adding staff, people with skills in technology, health care and alternative energy (all of which can be gained while earning a degree at a career-oriented school) are finding their chances of finding work far greater than someone with a bachelor's degree in liberal arts. The Department of Education should be leading the way in developing tools to get more students into college. Instead, they are singling out one vitally important segment of the post-secondary landscape and putting up "no trespassing" signs, keeping out the students who would benefit the most.”

  Gregory Cappelli (Co-CEO of Apollo Group and Chairman of Apollo Global) as quoted in “Higher Education at a Crossroads” – a position paper released by Apollo in August, 2010:

  “By questioning whether proprietary institutions are the recipients of too much financial aid funding, critics are actually questioning whether non-traditional and socio economically disadvantaged individuals deserve the right to have access to the same student financial aid funds, and thus access to an education, as more affluent students do.”

  “We are committed to delivering a quality education to those who are willing to work hard enough to realize its benefits.”[Two Apollo executive officers received degrees from University of Phoenix – one being the founder Dr. John G. Sperling’s son, Peter Sperling (Peter received his MBA)]

  “Importantly, we understand that simply enrolling students for the sake of financial gains will never prove successful in the end. Why? Because we believe that only by consistently providing a strong value proposition to our students can our shareholders generate sustainable returns over time. It’s that simple.”

  “We firmly believe that while not all proprietary institutions are the same, accredited, degree-granting schools that comply with regulations play a critical role in meeting the needs of today’s non-traditional students, and they do so at a significantly lower cost to the taxpayer than traditional public or private independent schools.”

  “We also believe it is critically important for us… to ensure that individuals who came from backgrounds in which they never thought they had an opportunity to go to college, individuals who for financial reasons had to start working or chose to join the military immediately after high school, or who simply did not appreciate the value of an education until later in life, recognize that there is a way for them to attain a college degree, and thus an opportunity to improve their position in life.”

  “With more than 500,000 alumni, our graduates are employed by thousands of companies and organizations – large and small, including Fortune 500 companies and the White House – within a variety of industries and in various capacities, including entrepreneurs, senior level executives and CEOs.”

  Bill Gates (founder Microsoft) in a quote excerpted from a Feb. 17, 2009 Bloomberg article by Carmine Gallo entitled “Bill Gates: The Great Communicator?”:

  “If you are low income in the United States, you have a higher chance of going to jail than you do of getting a four-year degree.” [A very good reason why the private sector, in concert with traditional institutions, should be encouraged in its mission to provide increased access for this demographic]

• Report this Comment On January 11, 2011, at 8:28 PM, klabacka wrote:

  I have been working with students and their federal student loans since 1990 with the company I started called www.defaultprevention.com and I can assure you that students at for-profits are a quality bunch. However, their demographics are different than the traditional 4 year student and their credit is and was different upon initial enrollment; hence, it should be different when they graduate. If the for-profits are not in the picture then who is going to fill the void? The traditional 4 years institutions cannot and will not fill the void. Look at history.

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