Legislation, Policy, Required, University & College - Written by on Monday, July 18, 2011 11:46 - 0 Comments

Thursday’s Senate HELP Meeting, May Be DOA Says UBS Analyst Ariel Sokol.

photo: courtesy Iowa Democratic Party

By Paul Glader

The U.S. Senate’s HELP (Health, Education, Labor and Pensions) Committee holds a meeting on Thursday at 2 p.m. that will deal with ”Improving For-Profit Higher Education: A Roundtable Discussion of Policy Solutions.”

Witnesses may include: Holly Petraeus (Consumer Financial Protection Bureau Office for Service Member Affairs), Daniel Hamburger (CEO of DeVry), Barmak Nassirian (AACRAO, noted for-profit critic), Bob Shireman (formerly of the U.S. Department of Education), and others.

The view from Ariel Sokol at UBS Investment Research:

With a divided Congress and an upcoming election near year, we think it fair to say that near-term legislative reform of postsecondary education likely does not occur.  Longer-term, a Republican majority in the Senate or alternatively a Republican Presidential victory could minimize the inclusion of legislation harmful to the operations of institutions with a for-profit tax status.

But Sokol notes, in a report, that “the Higher Education Act could be reauthorized as early as 2013, and that some modest reform of the for-profit sector could emerge in that piece of legislation.” Reformers are still likely to move forward with changes to for-profit colleges that could affect companies in several ways. Sokol suggests the following areas will be up for possible discussion on Thursday:

  •  Private student loans. Some institutions finance private student loans for enrolled students with assumed default rates of greater than 50%…  ”Currently Senator Dick Durbin has introduced legislation in the Senate to enable students to discharge such debt in bankruptcy.”
  • Credit transfer.  Some  say institutions in the industry don’t disclose transferability of credits to other institutions.
  • Accreditation.  Some worry that students may attend unaccredited programs at accredited schools.
  •  90/10. Some think this rule will cause schools to raise prices when they can’t offer private student loans as the other 10% of the 90/10 calculation. Eliminating 90/10 could lead to tuition deflation, a negative impact on for-profit revenues per student and earnings. Also, some think military tuition assistance should be part of the 90/10 calculation.
  • Default rates. Some say schools should report five-year or lifetime default rates rather than short-term rates. Short term rates don’t encourage schools to give deferment/forbearance to students.
  • Limits on marketing.  Some say for-profits spend more than 20% of revenue on marketing, both with ads and enrollment counselors, and that such spending should be limited.
  • More disclosure. Some say the IPEDS (Integrated Postsecondary Education Data System) doesn’t collect the right info to analyze the for-profit college sector. Some say better oversight of the industry will happen when better data collection takes place.

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