Seeking Alpha

Scrutiny on education sector ramps up

  • Some for-profit colleges appear to be facing a new set of investigations, with a number of them receiving requests for information from a network of at least 12 attorneys general.
  • Since Friday, Education Management (EDMC), Corinthian Colleges (COCO), ITT Educational Services (ESI) and Career Education (CECO) have said they have been contacted about providing data.
  • The AG's want information about about student recruitment, job placement statistics, graduation and professional licensing rates, and student loans.
  • The Consumer Financial Protection Bureau has said that it plans to tackle student debt. CFPB chief Richard Cordray yesterday said the agency has received thousands of complaints and comments about the issue.
Comments (7)
  • dahnshaulis
    , contributor
    Comments (98) | Send Message
     
    It should be interesting to see how far these investigations and lawsuits get, particularly in California, where Corinthian Colleges faces a lawsuit from the AG. COCO has been through this before and has had enough power to battle this (and settle out of court). Corinthian Colleges is also backed by Wells Fargo, which owns roughly 25% of COCO stock through the bank and mutual funds. Will Wells be willing to continue this relationship if they get pulled too far into the mix (it tarnishes their image)?
    29 Jan, 09:27 AM Reply Like
  • Moneycurious
    , contributor
    Comments (19) | Send Message
     
    In general the response to these investigations is to ramp up lobbying. Given that Title IV defaults are reaching critical mass the companies may want to try to actually contribute to the educational environment. I contacted Tom McClintock of CA who indicated that he had been contacted by EDMC lobbyists. He believes that future for these schools is in loaning money to and recruiting minorities. So really nothing new with these guys at all.

     

    The stocks seem to be market value and sell short, so they still have a lot of attraction.
    29 Jan, 12:34 PM Reply Like
  • dahnshaulis
    , contributor
    Comments (98) | Send Message
     
    Yes, increasing lobbying...and marketing. More ads selling the dream...
    31 Jan, 11:45 AM Reply Like
  • dahnshaulis
    , contributor
    Comments (98) | Send Message
     
    That's an interesting point. Lobbying and marketing have been the strategy for many FPEs so far; actually reforming (e.g. improving the product and lowering the cost) would be more challenging.
    31 Jan, 12:03 PM Reply Like
  • See the Light
    , contributor
    Comment (1) | Send Message
     
    There are a select few who have a longer term perspective focusing on academic quality to ensure sustainable growth. Most others are owned by private equity firms and looking to cash out like Northcentral University who have hired ex-EDMC execs and minions. Very lucrative online masters and doctoral degrees, low cost with sub-par instruction, high lead generation expenditure, easy entry requirements, and high profit margins. Makes the private equity owners and senior management very wealthy. Good business model if not for the damage inflicted on unemployed grads, debt load for the rest of society to cover, and the reputation of degrees granted in the USA. Some students know this is a degree mill and choose the school anyway, so no tears for them.
    29 Jan, 01:35 PM Reply Like
  • dahnshaulis
    , contributor
    Comments (98) | Send Message
     
    Good points STL, I guess the banks have to do something with all the Q1-2-3-4-infinity money. It seems like some of these schools are becoming largely bank (and hedge fund) owned.
    31 Jan, 11:49 AM Reply Like
  • Moneycurious
    , contributor
    Comments (19) | Send Message
     
    Hi d,

     

    The issue here is not really one of image. While these have some controversy associated with them it is a question of value and time investment. These companies mare hard on investors. If EDMC is an example of the sector then it seems that three issues are at play. The first matter is the the executive composition makes no sense. There have been a number of people brought on board in the past eighteen months, none of whom appear to be fit for their positions nor do they indicate that there is a long term game plane for this company.

     

    The average investor in this size stock really will get weary of the constant devaluation and loss of good will that results from these waves of law suits. The third issue is Ed West is loosing credibility. The promises to raise enrollment and raise standards were not credible when his predecessor made them and truly are inadequate in every way imaginable given the present context.
    4 Feb, 11:01 AM Reply Like
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