accredidation of BPI

ED.gov was created in 1980 by combining offices from several federal agencies. ED's mission is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access.
The U.S. Department of Education does not have the authority to accredit private or public elementary or secondary schools, and the Department does not recognize accrediting bodies for the accreditation of private or public elementary and secondary schools. However, the U.S. Department of Education does recognize accrediting bodies for the accreditation of institutions of higher (postsecondary) education.

Two Regional and National Institutional Accrediting Agencies recognized by the Dept. of Education are:

• North Central Association of Colleges and Schools, The Higher Learning Commission (HLC)
•  Western Association of Schools and Colleges, Accrediting Commission for Senior Colleges and Universities

The Higher Learning Commission (HLC) is an independent corporation and one of two commission members of the North Central Association of Colleges and Schools (NCA), which is one of six regional institutional accreditors in the United States. The Higher Learning Commission accredits degree-granting post-secondary educational institutions in the North Central region.

According to Bridgepoint Education, Inc. (BPI) 10K, Mar 2, 2011

An institution must be accredited by an accrediting agency recognized by the Department in order to participate in Title IV programs. Each of our schools is accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools, which is recognized by the Department as a reliable authority regarding the quality of education and training provided by the institutions it accredits. Ashford University was reaccredited by the Higher Learning Commission in 2006 for a term of ten years, and the University of the Rockies was reaccredited by the Higher Learning Commission in 2008 for a term of seven years.

 Under the Risk Factors section of 10K is the following paragraph:

"If Ashford University and the University of the Rockies are considered to be outside of the Higher Learning Commission's jurisdiction under a new policy, the institutions could lose accreditation and become ineligible for Title IV programs.          

The Higher Learning Commission has recently adopted revised bylaws and related policies which outline the basis on which an institution may claim that it is within the commission's jurisdiction. The revised bylaws provide, subject to specified grace periods and grandfathering provisions, that an institution must be incorporated within a state in the 19-state north central region and also have a "substantial presence" in the north central region, as defined by commission policy, to be considered within the commission's jurisdiction. For more information, see "Regulation—Accreditation—Changes to Higher Learning Commission jurisdiction" in Part I, Item 1 of this report. The Higher Learning Commission will evaluate an institution that was accredited by the commission as of July 1, 2010 (such as Ashford University and the University of the Rockies), against the "substantial presence" definition at the time of the commission's next comprehensive evaluation of such institution, except where the commission has information to indicate that an institution does not meet this requirement and initiates, subsequent to July 1, 2012, an inquiry to review jurisdiction. Ashford University and the University of the Rockies are each scheduled for their next comprehensive evaluations in 2014-2015. 

Out of the 10K, Mar 2, 2011 -

"Ashford University expects that the FSA will consider the findings and recommendations in the final audit report and engage in a dialog with the university prior to determining what, if any, action to take. If the FSA were to determine to assess a monetary liability or commence an action to limit, suspend or terminate the university's participation in Title IV programs, Ashford University would have an opportunity to contest the assessment or proposed action through a series of administrative proceedings, with the right to seek review of any final administrative action in the federal courts. Although we believe Ashford University operates in substantial compliance with Department regulations that are applicable to the areas under review, we cannot predict the ultimate extent of the potential liability or remedial actions, if any, that might result from the recommendations by the OIG in the final audit report."

In addition, BPI has applied for additional accredidation. According to the 8K, May 13, 2011

In September 2010, Ashford University applied for eligibility from the Accrediting Commission for Senior Colleges and Universities of the Western Association of Schools and Colleges ("WASC"). 

On May 12, 2011, Ashford University received a letter from WASC stating that the WASC Eligibility Review Committee has reviewed the application and determined that the university meets all of the WASC eligibility criteria and may proceed with an application for initial accreditation. Additionally, the letter confirmed that Ashford University is authorized to pursue WASC accreditation under Pathway B, the process for institutions that currently hold accreditation with an institutional accreditor recognized by the US Department of Education. A determination of eligibility is not a formal status with WASC, nor does it ensure eventual accreditation; it is a preliminary finding that Ashford University is potentially accreditable and can proceed within four years of its eligibility determination to be reviewed for initial accreditation status with WASC. 

Additional Articles:
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http://www.fool.com/investing/general/2011/05/11/here-are-2-diamonds-in-the-rough.aspx?source=iaasitlnk0000003

What if the Gainful Employment Rule Gets Weakened?

Reuters announced that The Department of Education new regulations, known as the "gainful employment rules" were sent to the Office of Management & Budget (OMB) on  May 3rd. It is the last of many rulings on how to regulate for-profit education schools  so that they are more accountable to their students in regards to U.S. government dollars spent on school loans. Already finalized are new rules to regulate recruiting practices, graduation rates & job placement.

According to MSN,
"For-profit colleges are facing scrutiny from regulators and lawmakers who say some universities aren’t adequately preparing students for employment and graduates can’t repay their federally backed loans."
"No additional information regarding the potential timing of a final ruling was made available; however, we note that when the initial draft of the gainful employment rule was submitted to the OMB last October, its review took approximately  10 days."
"Finally, department officials have been silent on the ultimate implementation date in recent months, despite a six-month delay in its ruling. We assume that adoption of the gainful employment proposals will remain at the current July 2012 date."

For-profit schools have been lobbying to get the final ruling deferred or weakened.  There is a movement  to get the legislation delayed.  They have even impuned  Steven Eisman lobbying for the passage of this regulation to short this sector. A citizens group has written, "Given the ongoing IG investigation, the potential for an SEC investigation, and the significant congressional concern, why rush the regulation out?  What if the IG investigation reveals the regulation was, as it appears, improperly promulgated?  Would it then be revoked?  Public confidence in Education’s regulatory process has been shaken.  The department would do well to wait for the results of the IG investigation before deciding whether and when to publish the gainful employment regulation."

What happens if they succeed in delaying or scratching these rules?
Many schools have already implemented new pilot programs for these regulations. Many have already taken the initial disruptions early and will see improvement throughout the year as things stabilize.

Lincoln Educational Services Corp. (LINC) has the best Benjamin Graham Value number but it's profits fell for this last quarter and guidance was restated downwards. They took the pain early and will see improvement throughout the year as the disruption stabilizes. They have no buyback program & instead offer dividend 6.20% yield.

Bridgepoint Education, Inc. (BPI) bucked the trend. Their last quarter was a beat, although this company is not as good a value play. For-profit colleges are permitted to get as much as 90 percent of their revenue from U.S. student grants and loans.

But BPI enrolls very few student who use grants and loans. 
[Edit: There is a perception floating around that BPI has fewer Title IV students than other for-profits. According to their 10K filing, "In the years ended December 31, 2010, 2009 and 2008, Ashford University derived 85.0%, 85.5% and 86.8%, respectively, and the University of the Rockies derived 85.9%, 84.6% and 80.8%, respectively, of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department regulations) from federal student financial aid programs"  

But that doesn't negate the premise, necessarily. ]

Articles:
http://www.fool.com/investing/general/2011/05/07/a-fool-looks-back.aspx
http://us.rd.yahoo.com/finance/external/forbes/SIG=145cov765/*
http://www.forbes.com/2011/05/03/tuesday-sector-leaders-music-electronics-stores-education-training-services-marketnewsvideo.html?partner=yahootix