Could Bridgepoint Be The Next For-Profit To Fold?

May 23, 2015 6:15 AM ETZovio Inc (ZVOI)COCOQ11 Comments
Duane Bair profile picture
Duane Bair
486 Followers

Summary

  • Bridgepoint is the operator of two for-profit colleges.
  • The largest of the two is Ashford University.
  • Ashford University is the subject of at least five fraud investigations.
  • The company's business model appears to rely on deceiving students.
  • New regulations will severely impact future revenues.

Bridgepoint Education (BPI) is one of the largest for-profit higher education institutions in the United States. It has also been alleged to violate fair marketing standards repeatedly. Like many other for-profit schools, Bridgepoint relies on questionable tactics to recruit new students. The US Department of Education has enacted new regulations which are set to take effect in July of this year. Currently, the lobbying group which represents the for-profit college industry is suing the Department of Education to block the impending changes to higher education disclosure standards. If the lawsuit is unsuccessful and the administration is able to put forth these new rules, Bridgepoint will not meet the standards. Failure to meet the required standards could result in the department pulling federal student aid - which accounts for nearly all of Bridgepoint's revenue. Corinthian Colleges (OTCPK:COCOQ) recently experienced a similar issue, which resulted in that company seeking bankruptcy protection. While in a better cash position than Corinthian, Bridgepoint faces a possibility of losing nearly all its revenue in the coming years. The company represents the ideal short: it has huge revenue risk, faces declining demand due to its sometimes unpopular practices, and is alleged to be violating a number of laws.

The Obama administration has fought hard to improve the standards at for-profit universities. While the Department of Education has made great strides in cleaning this industry up, there is still significant progress to be made. Recognizing that, Secretary of Education, Arne Duncan was able to implement the 90/10 rule in 2009. That law mandated that at least 10% of tuition revenues come from sources other than federal student aid (Title IV funds).

Continuing with the goal of improving higher education, the administration enacted a new set of rules in 2010. The goal was to force online and for-profit schools to provide

This article was written by

Duane Bair profile picture
486 Followers
I am interested in researching and writing unique articles that combine politics and finance. With a background in Political Science and Economics, I often look at the impact regulations have on the bottom line. I generally take a short perspective when looking at companies. Too many companies get away with lying to investors and the public. I hope that my articles can shine some light on the misstatements made by various management teams and add to improved corporate governance in this country.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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