Here's something you might be interested in.
The Department of Education last night (June 1) issued Milquetoast, pusillanimous new regulations for the for-profit colleges, as many such as myself expected. Programs could lose their federal aid (thus be shut down) if over the next four years their graduates fail to meet new benchmarks for loan repayment and ratio of debt to income, according to the New York Times. "But amid intense lobbying by the for-profit college industry and pressure from Republican lawmakers, the department significantly eased the rules from an earlier draft," commented the Times. "We believe that very few programs will be forcibly closed by our standards," said Secretary of Education Arne Duncan, according to the Times. "We want to give people a chance to reform." This, of course, is a joke.
Stock of San Diego's Bridgepoint Education zoomed 11.61% this morning to $26.43. Corinthian Colleges is up 32.8% and Apollo up 11.3%. In a column Feb. 2, I had said that Bridgepoint stock would likely rise significantly, because more than half the shares were short -- that is, more than half of investors were betting it would go down. Any good news would force the shorts to cover, or buy the stock, running it up. Bridgepoint has been rallying in recent days, probably in anticipation of the weak regulations to come out of Washington. In the last month, the number of Bridgepoint shorts has dropped from 10.06 million to 8.86 million; the shorts have already been covering.
Now for the numbers: for-profit colleges represent 10% of students but 44% of loan defaults. In the two-year program, a whopping 84.4% of students at Bridgepoint's Ashford University (which accounts for almost all its students) drop out. A stunning 63% of four-year students drop out. Officially, Bridgepoint gets 85% of its revenue from federal loans and grants, but the percentage is probably closer to 100 when military recruits are considered.
This is a classic example of why the U.S. is incapable of dealing with its deficit. In this case, it's the Republicans, who supposedly oppose deficits, who stepped in to make sure money continues to drain from the Treasury. In other cases, it's the Democrats. One question: how many politicians and bureaucrats in Washington had taken long positions in stocks of the for-profits before this announcement came out?
The Department of Education last night (June 1) issued Milquetoast, pusillanimous new regulations for the for-profit colleges, as many such as myself expected. Programs could lose their federal aid (thus be shut down) if over the next four years their graduates fail to meet new benchmarks for loan repayment and ratio of debt to income, according to the New York Times. "But amid intense lobbying by the for-profit college industry and pressure from Republican lawmakers, the department significantly eased the rules from an earlier draft," commented the Times. "We believe that very few programs will be forcibly closed by our standards," said Secretary of Education Arne Duncan, according to the Times. "We want to give people a chance to reform." This, of course, is a joke.
Stock of San Diego's Bridgepoint Education zoomed 11.61% this morning to $26.43. Corinthian Colleges is up 32.8% and Apollo up 11.3%. In a column Feb. 2, I had said that Bridgepoint stock would likely rise significantly, because more than half the shares were short -- that is, more than half of investors were betting it would go down. Any good news would force the shorts to cover, or buy the stock, running it up. Bridgepoint has been rallying in recent days, probably in anticipation of the weak regulations to come out of Washington. In the last month, the number of Bridgepoint shorts has dropped from 10.06 million to 8.86 million; the shorts have already been covering.
Now for the numbers: for-profit colleges represent 10% of students but 44% of loan defaults. In the two-year program, a whopping 84.4% of students at Bridgepoint's Ashford University (which accounts for almost all its students) drop out. A stunning 63% of four-year students drop out. Officially, Bridgepoint gets 85% of its revenue from federal loans and grants, but the percentage is probably closer to 100 when military recruits are considered.
This is a classic example of why the U.S. is incapable of dealing with its deficit. In this case, it's the Republicans, who supposedly oppose deficits, who stepped in to make sure money continues to drain from the Treasury. In other cases, it's the Democrats. One question: how many politicians and bureaucrats in Washington had taken long positions in stocks of the for-profits before this announcement came out?