For-profit college operators may have caught a break with the midterm election results and the Obama Administration easing up on certain student loan default rate calculations that will help determine federal aid to colleges. And judging from recent financial results from the publicly traded for-profits, they’re going to need it.
In September, the U.S. Department of Education announced tweaks to the default rate calculations that should allow more colleges — and for-profit schools in particular — to maintain access to federal aid than would have under a previously proposed stricter formula.
And this month, election results that gave Republicans control of both houses of Congress probably spelled the end of the hopes of reformers to tie financial aid to a Department of Education college ratings system. Also, decreased federal regulation of higher ed in general is expected under Republican legislative leadership, relieving the kind of pressure that, for example, took down Corinthian Colleges.
Most of the large, publicly traded for-profit college enrollment numbers are down, though DeVry Education Group is a notable exception. But even among the for-profits with declining enrollments, several chief executive officers are predicting that a rebound is coming soon.
Career Education lost $48.1 million in the quarter ended Sept. 30, which was less than its $80.1 million loss for the same quarter last year but more than the loss that Wall Street analysts expected. The for-profit college operator managed to cut expenses by nearly 9% in the third quarter, but its total student enrollment declined 4.5%. That pushed revenues down to $227.5 million, compared to $244.1 million for the same quarter a year ago.
One bright spot for the company: A 26% increase in enrollment for its culinary schools, Le Cordon Blue North America, to 10,100 students. Career Education’s chief executive, Scott Steffey, says the overall enrollment losses weren’t as bad as the same quarter last year, and the company’s new student growth will provide a strong base for the future. Besides the culinary school, Career Education runs about 80 higher ed schools, including American InterContinental University, Brooks Institute, Harrington College of Design, and the International Academy of Design & Technology.
An education software developer as well as a college operator, Bridgepoint Education Inc. laid off 223 employees in California, Colorado, and Iowa earlier this month. The company said the layoffs, which came just before its third-quarter earnings release, bring its staffing levels in line with its student enrollment numbers. Bridgepoint reported Q3 revenue of $162.7 million, down from $182.8 million for the same quarter of 2013. On Sept 30, Bridgepoint’s total enrollment was 59,552 students, down from 68,566 one year earlier. Bridgepoint runs online college courses, Ashford University, University of the Rockies, and Denver Learning Institute, and also owns the Waypoint Outcomes software developer. The company’s student enrollment was 59,552 on September 30, compared to 68,566 students at the end of the third quarter of 2013.
Education Management Corp.
Education Management Corp. announced this month that it would stop reporting to the U.S. Securities and Exchange Commission and delist from the Nasdaq stock exchange. The reason, according to the company: Saving money on the SEC and Nasdaq's public disclosure requirements for listed companies. The for-profit college operator’s public disclosures of late haven’t included a lot of good news, with enrollment down to about 118,090 students from a peak of 160,000, and a loss of $664 million in its most recent fiscal year. Education Management is also restructuring its operations and carries $1.5 billion in debt, with lenders owning 96% of the company.
Apollo Education Group
Apollo Education Group Inc. revenues for its fiscal quarter ended Aug. 31 were down 16.7% from the previous quarter because of enrollment declines at its University of Phoenix. The university’s degreed enrollment was 233,500, down 13.2% from one year earlier. Despite the declining enrollment, the company’s chief executive, Greg Cappelli, says Apollo is making progress toward differentiating the University of Phoenix from the competition and diversifying the company, which also includes Apollo Global, serving students globally; Carnegie Learning, which publishes math textbooks; and the College for Financial Planning, which has 25,000 students. The company’s ideas for growth include a web development boot camp and a professional development group that will expand its portfolio of continuing education and certificate programs.
DeVry Education Group
For its fiscal quarter ended Sept. 30, DeVry Education Group, reported a 2.5% increase in revenue, to $462 million, and net income of $20.4 million, compared to its net loss of $7.1 million one year earlier. CEO Daniel Hamburger said that the company’s enrollment numbers for both new and total students continued to grow. The only institution under the company’s umbrella that suffered declining revenue for the quarter was DeVry University itself.
At DeVry Medical International, new student enrollment declined 3.6% to 943 students for the September term and overall enrollment dropped 0.8% to 6,406. For the company’s Chamberlain College of Nursing, new student enrollment was up 14.3% to 3,864 students and total enrollment was up 33.3% to 20,920. Carrington College new student enrollment was down 4% to 2,623 and overall enrollment dropped 0.9% to 7,634. DeVry Brasil’s new student numbers were up 37.8% to 5,217 and overall enrollment was 33,591, up 14.5%. DeVry University’s new student undergraduate enrollment was 5,268, down 20%, and its total undergrad enrollment was 39,857, down 15.1%. The Keller Graduate School of Management saw an overall enrollment drop of 13.4% to 15,532.
Net income for Strayer Education Inc. rose to $5 million for the fiscal quarter ended Sept. 30, from $3.1 million one year earlier. But the for-profit college operator had a 2% enrollment decline at Strayer University in Washington, DC, to 42,189 students. New student enrollments for the university and its online programs rose 5% and continuing student enrollment dropped 4%. Strayer’s chief executive, Karl McDonnell, said that if the company’s enrollment trends continue, it should see total student numbers grow in the first half of 2015, with revenues starting to grow about six months later. That would make 2015 the company’s “trough year” for earnings.