Educator Regulations Heat Up
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Higher education has been facing increased scrutiny and regulation from the Obama administration. For-profit institutions such as Bridgepoint Education (NYSE: BPI), Apollo Group’s (NASDAQ: APOL) University of Phoenix, and DeVry (NYSE: DV) have felt the pressure mounting recently. The increased monitoring is aimed at ensuring that students are being properly educated. However, the exposure has also opened up these institutions for criticism of their recruiting process as well as tuition prices and financial aid policies.
Bridgepoint, the parent of Ashford University and University of the Rockies, was recently denied accreditation by the Western Association of Schools and Colleges. They do have plans to appeal the decision and reapply for accreditation. Ashford is currently accredited by the Higher Learning Commission of the North Central Association of Schools and Colleges through 2015. The company stated that it initiated the application for accreditation through WASC after moving a substantial portion of its activities into that region. Although Bridgepoint is one of the few for-profit schools that hasn’t reported declines in new-student enrollments, the WASC decision could reflect poorly on future enrollments and prove very costly for the educational provider.
Currently Apollo Group is viewed by many analysts as one of the worst S&P 500 stocks, with a 27% loss in the past year. The company’s University of Phoenix has been under the microscope on several occasions and is facing fire for its recruiting practices. The admissions team operates more like a sales team than a group of educational advisors. They are rewarded with commissions based on the number of students that they enroll. Their financial aid team is not so different. To an outsider it appears that this company is more focused on revenue than on education.
DeVry is considered to be very similar to Apollo’s University of Phoenix; they prey on the uneducated masses. Its stock has fallen 50.6% in the past year alone as students are wising up to the predator-like tactics of these institutions. Both Apollo and DeVry are mainly online educational institutions. DeVry aims to become the leading global provider for career-oriented educational services. Its institutions, along with subsidiaries, provide many trade-based educational programs as opposed to Bridgepoint and Apollo’s educational programs.
Recently for-profit institutions won a small victory after a federal judge ruled that the Education Department failed to present enough evidence to justify its rule demanding that 35% of students at for-profit colleges be paying back their loans. The rule, which is meant to keep companies from taking federal cash while failing to prepare students for the job market, will have to be rewritten. However, for-profit educators still have a long way to go toward proving themselves to regulators as well as the American public. For now, these stocks will continue to slide.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of Bridgepoint Education. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.