By Alexander Moschina
As we head towards 2011 gets closer, for-profit educators in the United States are getting nervous.
That’s because early next year, the government will reveal the details of its “gainful employment” rule. The ruling will severely cut federal funding for schools, based on students’ debt-to-income ratio.
And while the midterm elections put plenty of Republicans in the House who oppose the rule, Democrats can still push it through. According to Dennis Cariello, former Deputy General Counsel for Postsecondary Education & Regulatory Services, they just have to do it before January 5.
And many for-profit institutions could struggle, as many receive over 80% of their profit from federal aid.
- For example, Corinthian Colleges (Nasdaq: COCO) is already warning its shareholders. According to CEO, Peter Waller, enrollment is dropping and is set to get worse: “We will experience the full impact… in the December quarter of the current fiscal year,” he said.
- Industry leader, Apollo Group (Nasdaq: APOL) also withdrew its 2011 forecast. The company now expects a 40% drop in enrollment.
But not everyone in this sector is anxious over what 2011 will bring. In fact, one for-profit educator has actually raised its 2011 guidance. And the news sent shares soaring…
Bridgepoint Education’s Growth to Remain “Tremendously Consistent”
Shares of San Diego-based Bridgepoint Education (NYSE: BPI) are up 7% so far this month on news that its third quarter revenue catapulted by 50% to $190.9 million. The company is set to crush analysts’ full-year expectations.
But it’s Bridgeport’s bullish outlook for 2011 that has investors so excited.
Despite looming restrictions, CEO Andrew Clark predicts business will continue as usual. He added that growth “continues to be tremendously consistent.” For example, total student enrollment rose by 41% during the last quarter.
And online classrooms are growing because Bridgepoint is so affordable. According to BMO Capital analyst, Jeff Silber, tuition is “relatively low” when compared to competitors.
And that’s precisely why this company doesn’t have to worry about the “gainful employment” rule…
Bridgepoint Education Beats Wall Street… and Washington
Right now, schools are scrambling to adjust their business models and lower tuition. But Bridgepoint doesn’t have to change too much. Because it offers such low-cost programs, it already meets most of the government’s pricing requirements.
In addition, the company has no need to worry about its students’ debt-to-income ratio. Its 45% loan repayment rate is one of the highest in the sector.
So unlike its rivals, Bridgepoint can keep growing…
Going into 2011, the for-profit sector will experience some major changes. Industry giants may not survive on smaller amounts of financial aid. But Bridgepoint will emerge unscathed. And its reputation for value will be key in securing more students as the competition crumbles.
The company is on the verge of exploding its market share and will soon take its place as an industry leader.
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