For college students, September means the beginning of a new school year. But for students attending for-profit colleges there are no guarantees. Just in July one of the largest for-profit higher education corporations announced it would be selling or closing nearly 100 campuses nationwide. Now over 72,000 students who attended schools owned by Corinthian Colleges face an uncertain future.
Students at Corinthian owned colleges were never informed that the company was on the precipice of bankruptcy. And even after the announcement, Corinthian continues to misinform current and prospective students about its future.
However, students attending Corinthian owned colleges may not be the only students that will have trouble finishing at their current school. The Apollo Education Group, EDMC, ITT Tech, three of the largest for-profit higher education corporation, are also facing similar financial and accreditation issues.
EDMC was recently sold to its creditors because the company could not meet its debt obligations. While there are no plans to close any campuses right away the company said there will be “continued strategic changes and transformation,” which probably means significant changes in the future.
ITT Tech has failed to file important financial information with the Dept. of Education and the Department can now withhold federal funds in order to make ITT Tech comply with this requirement. It was this exact penalty levied by Department of Education against Corinthian that led to the corporations collapse.
The University of Phoenix’s, owned by the Apollo Education Group, accreditation has been on “Notice” status since June, 2013. “Notice” status means that if Phoenix does make immediate improvements in key areas, the university is on a course to lose accreditation. Without accreditation the university can continue to operate but its students become ineligible for financial aid.
Students at Corinthian Colleges may have been blindsided by bankruptcy of the corporation that owns their college and many students still can’t get the information they need. But students at the University of Phoenix (Apollo Education Group), the Art Institute (EDMC), South University (EDMC), Brown-Mackie (EDMC), Argosy (EDMC) or ITT Tech should not wait until they read about their college in the paper. If you are a hard working student, who is investing hard earned money in order to earn a college degree, you deserve to know the truth about the financial well-being of your school. Send the CEOs of your for-profit college a postcard demanding full transparency.
- ITT has failed to file important financial information with the Dept. of Ed and the DOE can now withhold federal funds that are essential in keeping ITT Tech campuses open.[i]
- Creditors are worried that the government might target ITT just like Corinthian and have mandated that any government-imposed delay of five days or more in releasing financial aid money would cause ITT to default on the companies loans.[ii]
- ITT Tech stock has plummeted over 75% since last year to below $10[iii]
- The CEO resigned in August.[iv]
- EDMC could not meet its debt obligation and hence creditors now own 90% the company.[v]
- While there are no current plans to close any campuses it is hard to believe that there won’t be any major changes if EDMC continues to lose money.
- EDMC posted losses of $1.5 billion and $268 million in FY’s 2012 and 2013 respectively.[vi]
- Because EDMC has failed to meet the requirements of DOE financial responsibility rules, it is required by to post a letter of credit equal to 15% of the federal aid it receives – a whopping $348.6 million in 2013.[vii]
- After a decade of increasing profits and enrollment, EDMC suffered a major setback in 2012, when stock fell 88%. Once valued at $3.4 billion,[viii] EDMC’s current value has plummeted to $190.22 million.[ix]
- The company had to lay off over 1,500 employees since 2012.[x] [xi] [xii]
- In May S&P furthered lowered EDMC’s credit rating to CCC-, which is junk status.[xiii]
Apollo Education Group
- DOE recently subpoenaed the University of Phoenix around the university’s marketing and recruiting practices.[xiv]
- In 2012 the University of Phoenix closed 115 of its brick-and-mortar locations, including 25 main campuses and 90 smaller satellite learning centers and laid off 800 employees.
- The closing affected 13,000 students, who faced a difficult choice: enroll in online classes at Phoenix, or transfer to another college.[xv]
- But perhaps the most concerning problem facing the University of Phoenix is that its accreditation is in trouble. The Higher Learning Commission, the accreditor for the University of Phoenix, put the university on “notice” status in 2013.[xvi]
- “Notice” status means that if Phoenix does make immediate improvements in key areas, the university is on a course to lose accreditation.[xvii]
- Without accreditation the university can continue to operate but its students become ineligible for financial aid.[xviii]
- The Higher Leraning Comission will review University of Phoenix’s accreditation status in January, 2015.[xix]
[vi] EDMC SEC Form 10-K for FY ending in Jun 30,2013
[vii] EDMC SEC Form 10-K for FY ending in Jun 30,2013
[ix] Market Cap is calculated by multiplying the stock price by total shares, as of 8/21/14 the stock price was $1.51 and total shares are 125,977,000. All data collected from Yahoo Finance.
[xiv] Apollo Group SEC Form 10-Q, filed 06/25/14.
[xvi] Apollo Group, Inc. SEC Form 8-K, filed 7/10/13.
[xix] Higher Learning Commission, ”Public Disclosure Notice on University of Phoenix”, October 31, 2013