Domestic, Institutions, International, Landscape, Markets, Not-for-Profit, Policy, Recruitment, Regulatory, Required, Retention Rates, Student Loans, University & College - Written by on Tuesday, December 13, 2011 12:18 - 0 Comments

Heard: Expansion Abroad Could Keep For-Profits Out of Trouble in the U.S.

via Flickr by ...RISE.. 72 CREW under CreativeCommons

To dodge trouble with the U.S. Department of Education (USDOE) some for-profit colleges are expanding operations to serve students abroad among other things.  This move may allow these schools to continue to receive federal student aid (Title IV programs), a major revenue source. Under current regulations, aid money cannot comprise more than 90 percent of cash revenue, therefore 10 percent must come from other sources (known as the 90/10 rule enacted in 1998).  In addition, loan default rates cannot be higher than 25 percent for three consecutive years.  And in 2014, they will not be allowed to exceed 30% three years after graduation.  Otherwise, the USDOE will issue sanctions that may prevent schools from receiving aid money.

How will going abroad solve domestic issues? Revenue from abroad would dilute the percentage of cash revenue from federal aid, keeping schools within the 90% rule if all goes well.  According to Dan Newman at The Motley Fool, 26 percent of Kaplan’s total revenue came from abroad, and DeVry’s comprised 12 percent.

As for default rates, schools are employing other strategies. Dan Newman writes:

So what are schools doing about it? A variety of things:

  • Corinthian Colleges partnered with a private loan group offering students $450 million in loans to help source funding outside of Title IV programs.
  • Apollo is trying to shift more students to bachelor and master degrees from associates. It hopes this will give students increased job prospects and a higher likelihood of paying off any loans.
  • Many schools focus on recruiting military students, since military-provided assistance does not count as a Title IV program.

See how major for-profit schools rank:


Most Recently Reported 2-Year Cohort Default Rates

90/10 Rule

Apollo Group‘s (Nasdaq: APOL  ) University of Phoenix 18.8% 86%
Corinthian Colleges (Nasdaq: COCO  ) 21.9% 80%
Education Management (Nasdaq: EDMC  ) 13.1% 74%
Strayer (Nasdaq: STRA  ) 10% 78%
DeVry (NYSE: DV  ) 14.2% 70%-86%*
Bridgepoint Education (NYSE: BPI  ) 15.3%, 3.3%** 85%-86%**

Sources: and companies’ most recent 10-Ks. 2-Year Cohort Default Rates ending Sept. 30, 2009. *Percentages across various institutions under DeVry. **Percentages across various institutions under Bridgepoint.

Via For-Profit Educations Needs a Semester Abroad by Dan Newman for The Motley Fool

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