Responsive Documents - CREW: Department of Education: Regarding For-Profit Education: 8/17/2011 - 11-00026-F GE Release 8.16 - Part 2

From:
To:
Woodward Jennifer
Finley Steve
CC:
Date:
Subject:
8/16/2010 1:56:46 PM
FW: Preparing for Friday's release of repayment rates
From: Robert MacArthur [mail to :nnacarthur@altresearch. com]

Sent: Thursday, August 12, 2010 1:59PM
To: Robert MacArthur
Subject: Preparing for Friday's release of repayment rates
I didn't put it in the report but there has been a steady uptrend of loans in defennent and forbearance at Sallie Mae.
Rob MacArthur
Alternative Research Services, Inc.
203-244-5174
rmacarthur@altresearch. com
This material has been prepared by Alternative Research Services Inc., a Connecticut-registered Investment Adviser,
employing appropriate expertise, and in the belief that it is fair and not misleading. The information upon which this
material is based was obtained from sources believed to be reliable, but has not been independently verified. We do not
guarantee its accuracy. This information is not to be used as the primary basis of investment decisions. Copying, faxing,
replicating, or quoting from this report without the express written consent of Alternative Research Services Inc. is
forbidden. This is not an offer or solicitation of an offer to buy or sell any security or investment. Any opinion or
estimates constitute our best, and are subject to change without notice. This material is intended for use only by
professional or institutional investors and not the general investing public. The firm does not make a market or hold
positions in the securities mentioned herein, nor does the firm maintain any investment banking relationships in such
securities.
ALTERNATIVE RESEARCH SERVICES, INC

Robe11 M acArthur rmacarthur@.altresearch.com 203-244-5 17 4 w 203-2 15-3843 c August 12, 20 10
For-Pr ofit Education Industry

Sell Short:
DOE Holds Conference Call Re: G/E; Low Repayment Rate Component of
G/E Will Prove Devastating1
EDMC Call Reveals New Metrics-High Deferments and Forbearance
Repayment Rate Exposme
On Friday, August 13 1" the DOE will be releasing repayment rates fo1 t he for-profit
sector, BY SCHOOL. We believe the repayment rates for the publicly traded for-profit
schools will shock investors, pa1tic ulady for APOL. For reasons we have already
documented in recent months, mainly relating to high velocity intra-quarter churn, low
graduation AND students that remain eruolled against their will (a la o ur former
academic counselor interviews and the tables in the programs reviews documenting such
systematic behavior), we believe that the APOL repayment rates will be extraordinruily
low - below the 35% threshold. The caveat to this is the potential impact of the student
suit in California which alleged that the company was paying back loans on behalf of
students to keep the default r ates low. Still, even if that behavior is occulTing, and the
lawsuit went nowhere, we think that the repayment rates will be sufficiently low to
continue pressure on the for-profit sector.
We quoted some of the language fiom the NegReg document below. Even with a
transition year and a cap of 5% of programs, the number of students in those programs
could be vey substantial. On page 56 of the 165 page G/E rule and analysis, DOE
estimates 29,669 programs out of 52,980 will be restricted, or 265,000 out of 3.1M
students. On page 21 of the NegReg proposal, DOE estimates 42% ofPrivate for-profit
4 year pmgrams and 43.89% of 2 Jl for-profit schools will have a repaJinent rate below
35% ; 218 and 565 schools, respectively. The disproportionate size of eruollments at
publicly traded for-profits indicates extraordinary potential for low repayment rates.
By our count, APOL has 102 programs. 2
Page 70 NegReg: "During t he init ial yea of implementation as proposed, fm the award
year beginning July 1 , 2012, the number of ineligible programs would be limited to 5 % .
1
2
http://vAvw.ifap.ed. gov/eannouncements/08061 OGainfulEmplovmentConCall.html

http://vAvw.phoenix.edu/programs.html
Robert MacArthur rmacarthurl23@comcast.net 203-244-5174 w
203-215-3843 c August 12, 2010
The Department estimates that there would be 3,000 programs in the ineligible
category initially. Five percent of the 3,000 ineligible program or 450 programs would
not be able to award title IV, HEA progtam assistance to new students after the
notification date."
DOE Call Notes and Metric Mania
The DOE held a conference call last night with James Kvaal & David Bergeron. Data to
be released on Friday: repayment rate data by institution for all Title IV institutions,
derived by ED using NSLDS data. It was derived using a very complex calculation. Had
to address issue of consolidation, b/ c consolidation typically makes underlying loans
seem "repaid in full"; in calculating repayment measure, ED had to deal with in-school
and deferment status of borrowers. ED wanted to provide/ account for in-school
bmTowers and military deferments.
Repayment rate measure is similar to CDR. BUT, want to mention two important
diffe1ences between epayment rate in G/E and ED's CDR numbers: I) CDR only
captures students that go 270 days without repaying a loan, and doesn't account for
those who are less than 270 days delinquent, or in deferment or forbearance; and, 2)
repayment rate measure is based on student status ... weighted by size of loan
outstanding balance... not all student non-repayments are equal in taking repayment
tneasure.
Q: What can schools not fully eligible under G/E do to become eligible, given that
eligibility determination is based on past yerus' data?
A: Good question. Schools can work with former students to make sure they are paying
down debt. Many institutions use vendors to help manage default ... get deferments or
forbearances, but it may well be that these are not in the best interest of the students,
and students should be making payments, even if they are minimal, rather than taking
deferments or forbearance ... you can think about institutions shifting focus to a greater
emphasis on repayment, rather than deferment or f01.beruance." (This is not an option
for APOL and other unscrupulous players given their propensity for recruiting students
that have no income)
Q<Mark Kantrowitz>: Was 35% loan repayment rate threshold set as equivalent of so%
3-YR CDR, but not allowing f01 any man ipulation with egards to usmg
deferments/forberuance to push that number outside of 3-YR window?
A: The epayment rate is really a diffe1ent number than CDR ... try ing to undetstand it
omselves ... weren't trying to take into conside1ation any other existing
measures ... wanted to create an objective measure that takes into consideration
behaviors of students in early yeats of repayment."
Getting Serious about Repayment Rates Quotes from NegReg Proposal
"Repayment rate is a measure of whether program emollees are repaying theit loans,
regardless of whether they completed the program. This measure would provide some
assuTance to programs that may have h igh debt-to-income ratios for completer but
emoll prepared responsible students who understand their financial obligations."
"Programs whose former students have loan repayment rates below 35% may become
ineligible ... the proposed regulation would provide for a one-year transition period
2
Robert MacArthur m1acarthur123@comcast.net 203-438-0688 203-215-3843 August 12, 2010
during which the Department would limit the number of programs declared ineligible to
the lowest petforming progams producing no more than 5 percent of completers dming
an award year."
"Additional programs and programs that fail to meet the debt thresholds hut fall outside
the 5 percent cap during the transition year would be subject to the same requirements
as programs on a restricted eligibility status."
EDMC New Metrics Better Visibility Bad
"Today we would like to provide additional details regarding defaults, deferment and
forbearance f1om NSLDS ... We caution using this information to us as a potential impact
as this is not the repayment rate rather what was in default, default or forbearance for
loans entered into repayment during what is only part of the time period that has been
proposed by the Depattment. One dollar basis at EDMC the information is as follows on
April 30, 2010. In defaults in dollars it was a total of 4.8%, deferment was .14.4% and
forbearance was 17.3% and combining those three together it was a total of S6. 6% across
EDMC. Now we have consistently stated that we are firm advocates of broadened
disclosure requi1ements across higher education. We are in the process of implementing
increased disclosure to prospective students regarding median debt, and fmancial
literacy and other metrics on our own regardless whether the Department ends up the
gainful employment regulation."
"<Q - Jeffiey Silber>: Thank you so much. I appreciate the colot that you provided
going into the data egarding some of the information on deferrals, forbearance et
cetera. Can you give us a little bit more color on those numbers either by school or by
programs?"
"<A> Thanks, Jeff. This is Ed. So if you look at the total level across our four education
systems for example I were to add the three togethet at the Art Institutes we total about
35.1%. Art is a total of 40.3%, Brown Mackie is 35.0% and Sal is 36.6%."
(Out view is even if management warns investors about d1awing infe1ences fiom these
rates to repayment rates, we believe the mere increased transpruency going forward will
be a negative for the group. On Friday, we will see how close the repayment rates are to
these numbers.)
3
Robert MacArthur m1acarthur123@comcast.net 203-438-0688 203-215-3843 August 12, 2010
From:
To:
Scott Byron
Finley, Steve
CC:
Date: 4/14/2010 1:38:04 PM
Subject:
proposed regulation publicity
(b)(5)
Byron
-----Original Message----From: Nelson, Richard
Sent: Wednesday, April 14, 2010 12:02 PM
To: Hale, Milton; Scott, Byron
Subject: FW:
(b)(5)
-----Original Message----From: James, Bob

Sent: Tuesday, Aprill3, 2010 3:25PM
To: Nelson, Richard
Subject:
Robert H. James
Liaison for Career Institutions of Higher Education U.S Department ofEducation
FAX: 317-257-2098 Call first
Cell Phone #202-557-5835 D.C. # 202-377-4301 Indianapolis Office 317-257-2098
8527 Quail Hollow Road
Indianapolis. IN 46260-2208
13 April 2010
Americas/United States
Equity Research
Education Services (Business & Professional Services) I MARKET WEIGHT
CREDIT SUISSE
Education Services
Research Analysts
Kelly Flynn, CFA
617 556 5752
keny.nynn@credit-suisse.com
Patrick Elgrably, CFA
312 750 2974
patrick.elgrably@ credit-suisse.com
Adam Shatek, CPA
Upgrade DeVry and ITT On New Gainful

EmpIoyment Ins1g
. hts
312 750 3317

adam.shatek@credit-suisse.com
We are upgrading ITI (ticker ESI} and DeVry (ticker DV} to Outperform from
Neutral due to new insights on the DOE's Gainful Employment stance. We
are raising our ITT price target to $135 from $105 and our DeVry price target to
$75 from $55 as DCF discount rate reductions reflect perceived decreased
Gainful Employment risks. We detail our DCF analysis assumptions for DV and
ESI below. We are restricted on EDMC. All other Neutral ratings are
unchanged (see next page for details).
We believe DOE's latest GE proposal leaves 8%110 year parameters
unchanged. Following discussions with industry contacts last night, we believe
that the Department of Education on Friday submitted its Gainful Employment
and other program integrity proposed language to the Office Of Management
and Budget (the OMB) for vetting. We believe the goal is to publish the Notice of
Proposed Rule Making by May 15, or June 1 at the latest, and to publish final
regulations by November 1. We also believe the 8% debt-service-to-income
ratio and 10 percent repayment period inputs remain unchanged as of now and
that the "90% of graduates in repayment" exemption remains unchanged.
But, we believe DOE added a 50% completion exemption. Based on our
discussions, we believe one big change in the new draft proposal is the add back
of the "exemption" (that was removed in January after appearing in the initial
draft language) for schools with certain student completion and job placement
rates. We believe the completion rate cut off is now a more generous 50%
(versus 70% included in initial draft) and the placement rate cut-off is 70% (same
as in initial draft language; we believe most companies with placement rates
have rates above 70%).
We think 50% completion rate exemption would help ESI, DV, & EDMC
regulatory positioning the most. We believe the 50% exemption, although not
eliminating Gainful Employment risks, would most significantly improve the
positioning for companies with placement rates at or close to 50% that would,
without an exemption, have potentially seen earnings prospects decimated by a
new Gainful Employment regulation; DeVry, ITT and Education Management fit
this profile. Although none of these companies release completion rates, the
DOE data (which likely understates actual completion rates because it only
includes first-time, full time students and not transfers or part time students) is
close enough to 50% to make us think these companies likely have 50%
completion rates or could achieve them in coming years without decimating
earnings prospects; most recent DOE completion rate data points are -39% for
ESI (ESI also said on recent call that 60% make it through first year), -31% for
DV and - 41 % for EDMC's Art Institute (-56% of company's students). Further,
we believe ESI's valuation, and DeVry's to a lesser extent, have been among
those most negatively impacted by Gainful Employment concerns.
DOE flexibility may also fuel more investor optimism. We also acknowledge
that the 50% completion rate change, if in fact it occurs, could fuel investor
optimism that the DOE could ease its stance further in coming months in
response to more pressure that may arise after the NPRM is posted.
DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON

TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. U.S. Disclosure:
Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
CRCDITSUISSE
13 April 2010
Sector Implications/Thesis Update

Countercyclicality and other sector regulatory concerns remain; other ratings
unchanged. We continue to worry that countercyclicality will hurt growth in coming
quarters and we believe that, even if the Gainful Employment proposal is eased somewhat,
the broader regulatory landscape is likely to remain challenging for the foreseeable future;
we expect the DOE to tighten the Incentive Compensation rule and to generally seek to
crack down on schools' recruiting underqualified, under-informed students. Further, our
thesis on other companies under coverage is not changed significantly by our changing
view on Gainful Employment. Our concerns about APEI , APOL, COCO, LING and UTI are
largely unrelated to Gainful Employment. CPLA, STRA and LOPE trade at premium
valuations already, and we are not confident they would make the cut on the 50%
completion or graduation loan repayment Gainful Employment exemptions. For BPI and
CECO, although shares look cheap, we are also not confident Gainful Employment
exemptions apply, and we believe these companies also face other significant regulatory
risks. We are restricted on EDMC.
Valuation
Our price target changes largely reflect decreases in our discount rate used in the DCF
analyses due to lower perceived Gainful Employment risks, in our view.
Our $135 ESI price target is derived from our DCF analysis. We summarize our DCF
assumptions below:
2010-2020 revenue Compound Annual Growth Rate (CAGR) of 4.9%.
2009 operating margin of 37.9% going to 39.2% by 2020.
A Weighted Average Cost of Capital (WACC) of 16%.
Terminal free cash flow growth of 3%.
Working capital changes and capital expenditures that remain in-line with historical
ratios.
Our $75 DV price target is derived from our DCF analysis. We summarize our DCF
assumptions below:
2010-2020 revenue Compound Annual Growth Rate (CAGR) of 10.7%.
2009 operating margin of 19.7% going to 20.2% by 2020.
A Weighted Average Cost of Capital (WACC) of 14%.
Terminal free cash flow growth of 3%.
Working capital changes and capital expenditures that remain in-line with historical
ratios.
Company
DeVry Inc. (DV)
ITI Educational Services (ESI
o-
Price
ccy
US$
US$
u-
Price
09 Apr 10
65.06
108.78
Rating
Prev.
N
N
Outperform, N- Neutral,
Underperform, R- Restricted
Source: COmpany data, Credit Suisse estimates.
Education Services
Cur.
0
O IVI
Target Price
Prev.
Cur.
55.00
75.00
105.00
135.00
Year'
End
Jun 09
Oec09
EPS
Ccy
US$
US$
EPS FY2E
EPS FY1E
EPS FY3E
Prev.
Cur.
Prev.
Cur.
Prev.
Cur.
3.41
4.05
4.65
10.50
11.69
12.63
[VJ = StOCk considered volatile (see DISclosure Appendix).
CRCDIT SUISSE
13 April 2010
Companies Mentioned (Price as of 09 Apr 10)

American Public Education, Inc. (APEI, $46.03, NEUTRAL, TP $41 .00)
Apollo Group Inc. (APOL, $63.14, NEUTRAL [V], TP $65.00)
Bridgepoint Education (BPI, $23.60, NEUTRAL [V], TP $18.00)
Capella Education Company (CPLA, $90.90, NEUTRAL, TP $72.00)
Career Education Corp. (CECO, $31.70, NEUTRAL [V], TP $28.00)
Corinthian Colleges, Inc. (COCO, $17.51 , NEUTRAL [V], TP $14.00)
DeVry Inc. (DV, $65.06, OUTPERFORM, TP $75.00)
Education Management Corporation (EDMC, $22.60, RESTRICTED [V])
Grand Canyon Education (LOPE, $25.68, NEUTRAL, TP $21 .00)
ITT Educational Services, Inc. (ESI, $108.78, OUTPERFORM [V], TP $135.00)
Lincoln Educational Services (LINC, $25.70, NEUTRAL [V], TP $21.00)
Strayer Education, Inc. (STRA, $238.70, NEUTRAL, TP $195.00)
Universal Technical Institute (UTI, $23.05, NEUTRAL [V], TP $19.00)
Disclosure Appendix
Important Global Disclosures
I, Kelly Flynn, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specnic recommendations or views expressed in
this report.
See the Companies Mentioned section for full company names.
3-Year Price, Target Price and Rating Change History Chart for DV
DV
Date
Closing
Price
{USS}
4/27/07
6/ 18/07
2/21/08
6/20/08
7/30/08
10/8/08
12/5/08
4/21/09
8/14/09
10/28/09
1/27/ 10
34.52
35.22
43.86
58.54
56.75
45.19
58.37
42.12
51 .89
56.13
63.32
Target
Price
Initiation/
{USS) Rating Assumetion
29
NC
65
52
53
44
50
52
55
52
--------~~P+--~~~~~~L-~----~~,~~-----
47 --------1---~~~------~----~~~~-----------
42 --------4---~~--------~------~~-------------
37 --~~~~--------------------------------------21feb{)8 0
- OosngP~re
TatgeiPri::e
lniliai on/Assuf11llioo
Rating
Cl=OUiperloml: l'l=Ne<Jtrat UUndefpertorm: R Reslrcle<l; NR Not Rated: NC.Not CO<oered
3-Year Price, Target Price and Rating Change History Chart for ESI
ESI
Date
4/27/07
6/18/07
2/21/08
2/25/08
6/20/08
10/24/08
2/2/09
4/21/09
Closing
Price
(US$)
97.9
113.52
60.17
54.02
88.4
74.1
129.43
101.31
Target
Price
Initiation/
(US$) Rating Assumption
165 --------------------------~~~----------------145 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
110
65
61
81
84
165
105
NC
N
0
N
OosngPrire
Tatge1 Pri::e
<>
lniliai on/AssulllJiion
Rating
Cl=OUiperloml: l'l=Ne\Jirat U:Undefpertorm: RRestri:le<l: NR Not Rated: NC.Not CO<oered
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total
revenues, a portion of which are generated by Cred~ Suisse's investment banking activities.
Analysts' stock ratings are defined as follows :
Outperform (0): The stock's total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived
risk} over the next 12 months.
Neutral (N): The stock's total return is expected to be in line with the relevant benchmark* (range of 10-15%} over the next 12 months.
Education Services
CRCDITSUISSE
13 April 2010
Underperform (U): The stock's total return is expected to underpertorm the relevant benchmark* by 10-15% or more over the neX112 months.
Relevant benchmark by region: As of 2gh May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock's absolute total
return potential to its current share price and (2) the relative attractiveness of a stock's total return potential within an analyst's coverage universe ..,
with Outperforms representing the most attractive, Neutrals the less attractive, and Underpertorms the least attractive investment opportunities.
Some U.S. and Canadian ratings may tall outside the absolute total return ranges defined above, depending on market conditions and industry
factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock's total return relative to the average total return of
the relevant country or regional benchmark; for European stocks, ratings are based on a stock's total return relative to the analyst's coverage
universe ... For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock
rating definitions, respectively, subject to analysts' perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the
Neutral stock rating definition, respectively, subject to analysts' perceived risk.
..An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector.
Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in atleast8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts' coverage universe weightings are distinct from analysts' stock ratings and are based on the expected
performance of an analyst's coverage universe* versus the relevant broad market benchmark**:
Overweight: Industry expected to outpertorm the relevant broad market benchmark over the neX112 months.
Market Weight: Industry expected to pertorm in-line with the relevant broad market benchmark over the neX112 months.
Underweight: Industry expected to underpertorm the relevant broad market benchmark over the neX112 months.
An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector.
..The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Outperform/Buy
44%
(60% banking clients)
Neutral/Hold*
41%
Underperform/Sell"
13%
Restricted
2%
'For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy,
Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's
decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
Credit Suisse's policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the
market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credtt
Suisse's
Po~cies
for
Managing
Conflicts
of
Interest
in
connection
with
Investment
Research:
http://www.csfb.com'research-and-analytic&disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot
be used, by any taxpayer for the purposes of avoiding any penalties.
Price Target: (12 months} for (DV)
Method: Our $75 target price for DV is derived from our Discounted Cash Flow (DCF}-based model. Our target price is based on the following
assumptions: 2010-20 revenue CAGR (compound annual growth rate) of 10.7%, 2010 operating margin of 19.7% going to 20.3% by 2020, a WACC
(weighted average cost of capital) of 14% and terminal free cash flow growth of 3%.
Risks: The following factors may affect our projected results and $75target price for DeVry: its heavy reliance on IT-related education which could
hurt results if IT spending declines, an economic recovery which could curt countercyclical post-secondary education companies, changes in the
regulatory and accreditory environments, and the impact of a downturn in the student lending environment which could threaten the magnitude of
federal loans to DeVry's students.
Price Target: (12 months) for (ESI)
Method: Our $135 target price for ESI is derived from our Discounted Cash Flow (DCF)-based model. Our base case DCF has the following
assumptions: 2009-19 revenue CAGR of 4.9%, operating margins going from 37.9% to 39.2% from 2010-20, a WACC of 16%, and terminal free
cash flow growth of 3%.
Risks: The following factors may affect our projected results for ESI and our $135 price target: its heavy reliance on IT-related education which could
hurt results when IT spending declines, an economic recovery which has the potential to negatively impact countercyclical post-secondary education
services companies, impact of greater regulatory and accrediting agency requirements and the recent downturn in the student lending environment,
which impacts the magnitude of federal loans provided to ITI students.
Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the
target price method and risk sections.
Education Services
CRCDIT SUISSE
13 April 2010

The subject company (DV, ESI) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit
Suisse.
Credit Suisse provided investment banking services to the subject company (DV, ESI) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (ESI) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (DV, ESI} within the next 3
months.
Important Regional Disclosures
Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report.
An analyst involved in the preparation of this report has visited certain material operations of the subject company (ESI} within the past 12 months.
The analyst may not have visited all material operations of the subject company. The travel expenses of the analyst in connection with such visits
were not paid or reimbursed by the subject company, other than de minimus local travel expenses.
The analyst(s} involved in the preparation of this report have not visited the material operations of the subject company (DV) within the past 12
months.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not
contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada}, Inc.'s policies and procedures regarding the dissemination of equ~y research, please vis~
httpJ/www.csfb.com/legal_terms/canada_researchJ>olicy.shtml.
As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed w~h a customer when setting up an account or at anytime after that.
CS may have issued a Trade Alert regarding this security. Trade Alerts are short term trading opportunities identified by an analyst on the basis of
market events and catalysts, while stock ratings reflect an analyst's investment recommendations based on expected total return over a 12-month
period relative to the relevant coverage universe. Because Trade Alerts and stock ratings reflect different assumptions and analytical methods, Trade
Alerts may differ directionally from the analyst's stock rating.
The author(s} of this report maintains a CS Model Portfolio that he/she regularly adjusts. The security or securities discussed in this report may be a
component of the CS Model Portfolio and subject to such adjustments (which, given the composition of the CS Model Portfolio as a whole, may differ
from the recommendation in this report, as well as opportunities or strategies identified in Trading Alerts concerning the same secur~y). The CS
Model Portfolio and important disclosures about it are available at www.credit-suisse.com/ti.
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important
disclosures regarding any non-U.S. analyst contributors:
The non-U.S. research analysts listed below (if any} are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts
listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on
communications with a subject company, public appearances and trading securities held by a research analyst account.
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.creditsuisse.com/researchdisclosures or call+ 1 (877) 291-2683.
Disclaimers continue on next page.
Education Services
CREDIT SUISSE
13 April 2010
Americas/United States
Equity Research
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction
where such distribution, publication, availabil~y or use would be contrary to law or regulation or which would subject Credit Suisse AG, the Swiss bank, or its subsidiaries or ~s affiliates
("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of
the material, nor ~s content, nor any copy of it, may be ahered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All
trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or ~s affiliates.
The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an
offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are su~able for
any particular investor. CS will not treat recipients as its customers by virtue of their receiving the report The investments or services contained or referred to in this report may not be
suitable for you and it is recommended that you consuh an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report
const~utes investment, legal, acoounting or tax advice or a representation that any investment or strategy is su~able or appropriate to your indMdual circumstances or otherwise
constitutes a personal reoommendation to you. CS dces not offer advice on the tax consequences of investment and you are advised to contact an independent tax adviser. Please
note in particular that the bases and levels of taxation may change.
CS believes the information and opinions in the Disclosure Appendix of this report are accurate and complete. Information and opinions presented in the other sections of the report
were obtained or derived from sources CS believes are reliable, but CS makes no representations as to their accuracy or completeness. Additional information is available upon
request. CS aocepts no liability for loss arising from the use of the material presented in this report, except that this exdusion of liability does not apply to the extent that liability arises
under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in
the future issue, a trading call regarding this security. Trading calls are short term trading opportunities based on market events and catalysts, while stock ratings reflect investment
recommendations based on expected total return over a 12-month period as defined in the disclosure section. Because trading calls and stock ratings reflect different assumptions and
analytical methods, trading calls may differ directionally from the stock rating. In addition, CS may have issued, and may in the future issue, other reports that are inconsistent with, and
reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared
them and CS is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report CS is involved in many businesses that relate to
companies mentioned in this report. These businesses indude specialized trading, risk arbitrage, market making, and other proprietary trading.
Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future
performance. Information, opinions and estimates contained in this report reflect a judgement at its original date of publication by CS and are subject to change without notice. The
price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject
to exchange rate fluctuation that may have a poMive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADA's, the
values of which are influenced by currency volatility, effectively assume this risk.
Structured securities are complex instruments, typically involve a hgh degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and
assuming the risks involved. The market value of any structured security may be affected by changes in eoonomic, financial and political factors (induding, but not limited to, spot and
forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a
structured product should conduct their own investigation and analysis of the product and consuh with their own professional advisers as to the risks involved in making such a purchase.
Some investments discussed in this report have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that
investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment, in
such circumstances you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make
the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may
prove difficuh for you to obtain reliable information about the value, or risks, to which such an investment is exposed.
This report may provide the addresses of, or contain hypertinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed the linked
site and takes no responsibility for the content contained therein. Such address or hypertink Qnduding addresses or hyperlinks to CS's own website material) is provided solely for your
convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through this report or
CS's website shall be at your own risk.
This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Umited, One Cabot Square, London E14 4QJ, England, which is regulated in
the United Kingdom by The Financial Services Authority f'FSA"). This report is being distributed in Germany by Credit Suisse Securities (Europe) Um~ed Niedertassung Frankfurt am
Main regulated by the Bundesanstah fuer Finanzdienst!eistungsaufsicht ("BaFinj. This report is being distributed in the United States by Credit Suisse Securities (USA) LLC ; in
Switzerland by Credit Suisse AG; in Canada by Credit Suisse Securities (Canada), Inc..; in Brazil by Banco de lnvestimentos Credit Suisse (Brasi~ S.A.; in Japan by Credit Suisse
Securities (Japan) Limited, Financial Instrument Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The
Financial Futures Association of Japan, Japan Securities Investment Advisers Association; elsewhere in Asia/Pacific by whichever of the following is the appropriately authorised entity
in the relevant jurisdiction: Credit Suisse (Hong Kong) Um~ed, Credit Suisse Equities (Australia) Limited , Credit Suisse Securities (Thailand) Umited, Credit Suisse Securities
(Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG,
Taipei Securities Branch, PT Credit Suisse Securities Indonesia, and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities
produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research pro'vided to residents of Malaysia is authorised by the
Head of Research for Credit Suisse Securities (Malaysia) Sdn. Bhd., to whom they should direct any queries on t 603 2723 2020.
In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in acoordance with applicable securities legislation, which will vary
from jurisdiction to jurisdiction and may require that the trade be made in acoordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers
wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so
only by contacting a representative at Credit Suisse Securiities {USA) LLC in the U.S.
Please note that this report was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market
professional or inst~utional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for
any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or
in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case
are available upon request in respect of this report.
Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has ne~her reviewed nor approved
this report and/or any of the statements made herein.
If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial instMon is solely responsible for distribution. Clients of that
institution should contact that instiitution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice
by Credit Suisse to the dients of the distributing financial instiitution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees aocept any
liability whatsoever for any direct or consequential loss arising from their use of this report or its content.
Copyright 2010 CREDIT SUISSE AG and/or its affiliates. All rights reserved.
CREDIT SUISSE SECURITIES (USA) LLC

United States of America: +1 (212) 325-2000
and DV Upgrade.doc
From: Kvaal James

To: Kvaal, James
Bergeron. David
Yuan. Georgia
Chesley, Susan
CC:
Date: 1217/2010 2:42:50 PM
Subject: RE: 120810 GE draft presentation Exec.pptx
Attachments: 120810 GE draftpresentation Exec pptx.
l(b)(S)
From: Kvaal, James

Sent: Tuesday, December 07, 2010 1:36PM
To: Bergeron, David; Yuan, Georgia; Chesley, Susan
Subject: 120810 GE draft presentation Exec.pptx
(b)(5)
Thanks!!
From:
To:
CC:
Date:
Subject:
Sann Ronald
Finley, Steve
9/22/2010 1:37:06 PM
RE: article from the author of the GE study that was published last week
Good post. Thanks.
From: Finley, Steve

Sent: Wednesday, September 22, 201 0 8:51 AM
To: Siegel, Brian; Burton, Vanessa; Scaniffe, Dawn; Morelli, Denise; Marinucci, Fred; Jenkins, Harold; Woodward,
Jennifer; Wolff, Russell; Sann, Ronald; Wanner, Sarah; Varnovitsky, Natasha
Cc: Yuan, Georgia
Subject: article from the author of the GE study that was published last week
From HigherEdWatch:
Guest Post: Gauging Gainful Employment
September 21, 2010

By Ben Miller
Newspaper readers across the country have been greeted the past several days with full.-page color ads featuring large
pictures ofsmjling nurses, medical assistants, and mechanics under the headline "I don 't count? Some in Washington
think I don't." The ads warn that new Gainful Employment regulations that the U.S. Department ofEducation has
proposed would put 100,000 people out of work and eliminate educational opportunities for up to one million lowincome and minority students.
This ad campaign is funded by Corinthian Colleges , a for-profit higher education company that could have a lot to lose if
these regulations-- which would penalize proprietary schools for saddling students with more debt than they can pay
back-- go into effect. So it should come as no surprise to readers of Higher Ed Watch that the ads ' claims are a bit
hysterical.
I recently conducted my own analysis of the Education Department's proposed gainful employment rule by looking at the
pricing, repayment rates, and estimated salary information for over 12,600 proprietary school programs. I found that,
under these standards, only a small share of programs would be in danger of being removed from the federal student aid
programs. These new standards, however, would probably force many for-profit colleges to alter their pricing and
approach to student debt- changes, that would, in other words, ultimately benefit the low-income and minority students
these schools predominantly serve.
The issue of Gainful Employment dates back to the first Higher Education Act of 1965 and makes perfect sense -if you
train people for specific jobs or vocations, you need to show that your graduates are actually able to find employment in
the fields in which they train. Despite being on the books for 45 years, Congress never actually defined a way to measure
gainful employment, instead giving colleges that offer vocational programs a free hand to report job placement and salary
data in whatever way they saw fit.
But now, with widespread allegations of!ending abuses at for-profit colleges , the Education Department has decided
that it wants to curtail that freedom . Under the regulatory proposal it released in July, the Department would start
determining whether a program provides gainful employment by using hard data that judges programs by the ratio of the
debt that graduates assume relative to their current earnings and the rate at which they are able to repay it. If programs
offered by for-profit colleges meet certain thresholds on those measures, they' ll be fine and nothing will change. But if
they exceed specific benchmarks, they risk losing eligibility for federal student aid. Programs that fall in between will have
to warn students that they may be taking on high debt levels and could have their enrollment capped.
Given the reliance of the for-profit education industry on federal student aid dollars, a proposal that threatens schools'
participation in these programs is understandably very controversial. Much ofthe debate has centered on how many and
what types of programs are likely to be affected. The Education Department estimated that about 5 percent of programs
--representing about 8 percent of students at for-profit schools-- would lose eligibility. A study by an advisory
company called the Parntheon Group and funded by Corinthian Colleges estimated the effect would be four times as
large, affecting 32 percent of for-profit students. Such wildly different estimates makes it difficult to accurately gauge the
standard's effect, let alone see what types of programs are most likely to be in danger.
To shed more light on the subject, I decided to conduct my own analysis. Overall, my findings are not that dissimilar
from the projections made by the Education Department. About 4 percent of programs would become ineligible for
federal student aid, while 16 percent would remain fully eligible. Another 65 percent of programs would retain eligibility
for student aid but have to warn prospective students about the debt levels they are likely to incur. The final 15 percent
would fall into the "restricted" category and would have their enrollment capped. Not surprisingly, I found that the effects
would be slightly greater at bachelor's degree programs, with about 8 percent losing eligibility and about 29 percent
being restticted. That makes sense-- obtaining a bachelor's degree takes longer, so students are likely to borrow more
debt relative to their starting incomes.
There are two categories of programs that appear to be most vulnerable. The first are those that train students in lowpaying occupations, like medical assistant, cosmetologist, and cook/chef. The second are those in high-tech areas that
have better earnings opportunities, but also substantially higher costs. These include programs in areas like e-commerce,
graphic design, design and visual communication, and Animation, Interactive Technology, Video Graphics and Special
Effects. It's worth noting that there aren't typically lots of available jobs in these areas, so the pay is only good if you can
get it.
One of the difficulties with all these estimates is that there isn 't a reliable source that shows federal and private loan
borrowing information for graduates by institution. Instead, my analysis assumed that student debt levels are roughly
equal to the cost of tuition, fees, books, and supplies less federal grant aid. This makes sense-- you borrow to pay for
your education. Most students at for-profits are working full-time, so their salaries can cover living expenses and other
costs. If anything, one would think this assumption slightly overestimates borrowing levels -- while about 92 percent of
for-profit students take out loans, surely some must drag down the average by not borrowing at all or taking out only a
small amount of money.
So imagine my surprise when the main lobbying group for proprietary schools released a statement criticizing the report
for vastly undercounting the amount of debt for-profit college students take on. The Career College Association tried to
lay the blame on students , saying that they often borrow far more than they need. But it' s not clear that schools are
innocent in this practice. Recent investigations by the Government Accountability Office and ABC News have revealed
that some of the largest for-profit higher education companies have been encouraging their students to take out as much
student loan debt as is available.
Regardless, CCA's argument sends a strange message : asking regulators to back off on the grounds that borrowing
levels are even worse than we imagined. If this is true, then that only makes a stronger case for why the government
needs to keep a closer eye on these institutions.
Ben Miller is a policy analyst at Education Sector , where he writes for the blog The Quick and the Ed . Prior to joining
Education Sector, Miller was a program associate in the Education Policy Program at the New America Foundation and
a prolific Higher Ed Watch contributor. His views are his own and do not necessarily reflect those of the New America
Foundation.
From:
To:
CC:
Date:
Sann, Ronald
Finley, Steve
6/23/2010 9:19:30 AM
Subject: RE: Chronicle article
Yes, very interesting developments. Thanks.
From: Finley, Steve

Sent: Wednesday, June 23, 2010 9:08AM
To: Siegel, B1ian; Burton, Vanessa; Scaniffe, Dawn; Morelli, Denise; Marinucci, Fred; Jenkins, Harold; Woodward,
Jennifer; Wolff, Russell; Sann, Ronald; Wanner, Sarah; Varnovitsky, Natasha
Subject: Chronicle article
Interesting article in the Chronicle about the upcoming oversight hearing on for-profit institutions, possible effects on
other schools, and the general lack of information about life-time default rates for institutions.
http://chronicle.com/article/New-Grilling-of-For-Profits/66020/
Worth reading for that discussion, but also interesting to see that some large for-profit schools are starting to give
students a form of"try it and see if you like it" option:
Kaplan is cautiously testing out one solution. Beginning this past March, Mr. Smith said, the university began a pilot
program in which new students can enroll conditionally and then leave after three weeks, without any debt or any
transcript, if they find they cannot hand! e the work.
"It is a substantial hit to revenue," he said of the trial course structure, "but the fact of the matter is it's absolutely the right
kind ofthing to do." The for-profit University ofPhoenix, the nation's largest university system, is advertising a similar trial
system.
From: Finkel Jessica

To: Woodward, Jennifer
CC:
Date: 9/22/2010 4:08 :10 PM
Subject: RE: Comments on "Additional Programs"
From: Woodward, Jennifer

Sent: Wednesday, September 22, 2010 3:57PM
To: Kolotos, John
Cc: Wexler, Rob; Thompson, Lauren; Finkel, Jessica; Sellers, Fred; Guthrie, Marty; McCullough, Carney; Finley, Steve
Subject: FW: Comments on "Additional Programs"
John-
Here are the comments orovided by Kaplan and Caoella on "additional programs." J<bl{S l
(b)(S)
(b)(S)
Thank you,
Jennifer
From: Wexler, Rob

Cc: Thompson, Lauren
Subject: Comments on "Additional Programs"
(b)(5)
);:>
Docket ID: ED-2010-0PE-0012
Gainful Employment in a Recognized Occupation
Reference: 34 CFR 668.7, 668.13,668.90
The University embraces the objective of full transparency to encourage students to borrow responsibly.
In addition to the clear and intrinsic value of higher education which provides a more broadly and
deeply educated citizenry, students obtain a postsecondary education for many reasons: to begin a
career, change careers or gain additional knowledge and skills to advance in their current career. In
1976, most proprietary schools offered vocational and occupational training programs leading to
recognized occupations at that time. Today, regionally accredited proprietary schools provide higher
education in academic programs and confer baccalaureate and post-baccalaureate degrees. If the
ultimate objective is to encourage students to borrow responsibly, additional student protections should
be debated by Congress and new legislation adopted before any new regulations are proposed. For the
reasons outlined below, these proposed regulations are discriminatory, overly complex, non-verifiable
with no ability to cure, administratively burdensome, too vague to properly assess the impact or
effectiveness, and have many unintended consequences. We are concerned that the rule as currently
proposed does not achieve public policy objectives, and we respectfully request the Department to
withdraw the regulatory proposal until congressional intent has been revisited and established.
The proposed regulation for determining eligibility of programs that lead to gainful employment is:
Discriminatory
If the Department is truly concerned about high debt and ability to repay, any proposed rules should
apply to all students. The recently released loan repayment rate data indicates the problem is not
limited to proprietary schools. If the proposed rule applied across all sectors and programs, one third of
community colleges, nearly one half of schools with the largest concentration of Hispanic enrollment,
and the vast majority of Historically Black Colleges and Universities would fail the loan repayment rate.
Sound public policy must achieve consistent treatment of students and schools.
Overly complex
The Department openly admits the proposed metrics are based on incomplete data because the
"current system does not yet track the detailed information". For example, with regards to the
proposed calculation of loan repayment, a consolidation loan will capitalize accrued, unpaid interest
under certain conditions, causing an increase in the principal balance even if the borrower is making the
required regular amortized payment on the loan. Another example is that interest and fees must be
paid before principal reduction on the rehabilitation of delinquent loans. These examples demonstrate
how, even if a student may be in good standing repaying their debt, they would still be counted against
the program's loan repayment ratio. Finally, due to the aforementioned data availability restrictions
and because of the economic recession and combination of recent legislation (ECASLA, FFELP
elimination and exclusivity of Direct loans), the vast majority of current students will require loan
consolidation, deferment and forbearance entitlements, and/or income based repayment options; all of
which are unable to be tracked within the proposed loan repayment calculation. Sensible public policy
should be transparent and simple enough that all stakeholders can clearly gauge how they are impacted
by the regulation.
Non-verifiable with no ability to cure

We are concerned about the dependency on Social Security Administration or other federal agency for
income verification. The proposal lacks due process because the income data provided by the Social
Security Administration is non-verifiable. Additionally, legal uncertainty exists whether or not the
Department could obtain confidential income information without a release from the taxpayer.
Furthermore, under the proposed regulations, institutions have no ability to view draft rates and
challenge the data integrity prior to official public release, as afforded under the cohort default rate
regulations. Moreover, the proposed regulation timeframe has a retroactive application with no
opportunity for institutions to cure any problem. If the intent of the proposed rule is to reign in debt
incurred by students, a longer phase-in period of restrictions and ineligibility may be warranted to
enable schools to get programs "into shape". If the intent is simply to get rid of programs, then the
proposed implementation schedule is probably effective. Reasonable and prudent public policy
implementation should be forward looking to allow corrective action plans to be effectuated.
Administratively burdensome
Considering the significant economic impact of these proposed regulations, the overall cost benefit
analysis is debatable. We believe the Department is significantly underestimating the data collection
burden and cost on institutions a'nd the government. For instance, in order to capture the necessary
student level loan detail information, the !PEDS file record layout will require extensive modification and
technical review. In turn, institutions need to develop new software, customize queries and perform
validation procedures to ensure data integrity. The complexity of multiple government agencies
capturing and exchanging student specific earnings data with personal identifier information is
unfathomable.
Unintended consequences
The proposed regulation is punitive to certain student populations. Existing research on Pell grant
recipients indicates lower socioeconomic students would be adversely affected by this proposal. By
nature, Pel! grant recipients are generally at-risk students that challenge all schools (public, private
nonprofit and proprietary) with the same issues. These proposed rules are discriminating to students,
not the schools they choose to attend. Additionally, ethnic diversity is underrepresented in the sample
model, therefore, the Missouri debt-to-income data is not a good proxy for national averages, especially
Hispanic and African American groups.
The debt to earnings test uses discretionary income on the poverty guideline for a single person yet
many non-traditional students are single parent families. Furthermore, the current proposal does not
consider personal, family matters by excluding household income in the debt to earnings calculation
even though the loan may have a reduced principal balance.
Post-baccalaureate, graduate and professional programs seem to fall outside of the concept of training
programs. Many non-degree programs enable an individual to refine their expertise or obtain a
specialization associated with a recognized occupation; however, the intent of the program is not
necessarily training to move the individual into the job market or basic career field (e.g. teacher's
certificate). Therefore, post-baccalaureate degrees and certificate programs should be excluded from
these regulations.
Congress created many viable alternatives for students facing economic hardship. In fact, the
Department encourages loan consolidation and promotes the income based repayment plan. The
proposed regulations would have an undesirable effect on students if schools steer students away from
beneficial repayment plans, deferments or forbearances because it does not reduce principal balance.
The proposed regulation is an impediment to market adjustments by requiring prior approval from the
Department for additional programs. The criteria and timeframe for program approval by the
Department are vague at best. The proposal provides no guidance for how programs may be evaluated,
allows no ability to challenge the rulings of the Department, provides no timing assurances on review
periods, and ultimately may disadvantage the American higher education system compared to other
countries due to the lack of innovative higher education programs. For example, technology changes at
a rapid pace and the business industry mandates adjustments to educational programs to meet these
dynamic changes. Also unclear in the proposal are the expectations of employer affirmations for
national and/or global distance-learning academic programs. The proposed regulation will stifle
innovation and has a crippling effect on the marketplace agility that could potentially eliminate high
quality programs, yet not impact programs of questionable value.
Economists have demonstrated it takes well beyond three years after graduation for those with higher
degrees to begin to experience the real financial advantage of additional education. Current or future
economic recessions are unpredictable and adversely affect the debt to income ratio. Can the value of a
program be isolated from temporary economic vagaries? With the national unemployment rate
hovering near ten percent, should we risk losing programs because of temporary economic problems
when the need for these programs will reassert itself?
The proposed regulation has the potential to eliminate access to higher education for many working
adults who have no alternative at a time when state budget cutbacks are forcing state financed
institutions to turn away students.
Although unconscionable, discriminatory, and potentially impermissible under existing federal law and
regulation, the most frightening unintended consequence is that institutions may contemplate prior
college loan balances as admissions criteria.
Too vague to assess the impact or effectiveness

The proposed regulation is vague and ambiguous on a number of fronts. For example, areas that need
clarity include, but are not limited to:
The treatment of loans for students who obtain multiple degrees from the same school. CIP
codes will be used to link specific students with specific programs at an institution. If an
institution has multiple programs with the same CIP code, how will the Department perform
program-level calculations?
What will be the impact of these rules on traditionally low-paying jobs with existing shortages of
qualified individuals that have cost intensive preparation?
Consolidation loans are excluded from loans paid in full, but the proposed rule does not explain
how to treat them in reduced principal balance.
The proposal uses the terms ~~earnings" and 11income" interchangeably and each has different
meanings.
An unaffiliated employer is not clearly defined and, on the surface, certainly not qualified to
determine if a program's curriculum aligns with occupations at those employers' business.
The proposed regulation is opaque in so many ways. Without further clarification and definition, we
cannot determine if the rule is fair and equitable. Public policy should not be created arbitrarily.
Recommendation
The mission of the Education Department is to promote student achievement and preparation for global
competitiveness by fostering educational excellence and ensuring equal access. The core mission of the
Federal Student Aid department is to ensure that all eligible Americans benefit from federal financial
assistance for education beyond high school. If there are statutory constraints to achieving this mission,
the debate belongs in Congress. We recommend the Department withdraw the proposed regulation
defining gainful employment until such time that Congress carefully considers an education quality index
for higher education that includes learning outcomes.
From:
To;
CC:
Date:
Subject:
Thompson Lauren
Kolotos, John
Woodward, Jennifer
Wexler Rob
Finkel Jessica
Sellers, Fred
Guthrie Marty
McCullough, Carney
Finley Steve
9/22/2010 6:16:48 PM
RE: Comments on "Additional Programs"
John,
l(b)(S)
Thank you,
Lauren
From: Kolotos, John

Subject: RE: Comments on "Additional Programs"
(b)(5)
From: Woodward, Jennifer

To: Kolotos, John
Subject: FW: Comments on "Additional Programs"
John-
Here are the comments provided by Kaplan and Capella on "additional programs."l(b)(SJ
(b)(5)
(b)(5)
Thank you,
Jennifer
From: Wexler, Rob

Sent: Wednesday, September 22, 2010 3 :23 PM
Cc: Thompson, Lauren
Subject: Comments on "Additional Programs"
Jennifer, I have attached the comments on "additional programs" from the comments submitted by Capella University
and by Kaplan Higher Education Corporation.
(b){5)
Comments on Additional Programs, University of Phoenix
SUMMARY
(b)(5 )
KEY COMMENTS
p. 3 - Additional Programs
(b)(S)
From:
To:
CC:
Date:
Subject:
Finley Steve
Macias, Wendy
6/14/2010 9:47:20 AM
RE: FYI-- Bloomberg article on gainful employment rule from Friday
I"'"'"'''"''~
Also thought this was interesting:
California Universities Consider Using The Word "Tuition" Instead Of Fees. The Los Angeles Times (6114, Gordon)
reports, "California's public universities," which "have stubbornly insisted on using the word 'fees' for the instructional
charges," are "now inching closer to using the word they've long viewed as taboo: tuition." Experts "said the issue was
not merely symbolic, noting that last year, it had briefly threatened to keep military veterans attending private colleges in
California from receiving promised benefits under the new GI Bill" from the US Department of Veterans Affairs, which
"had pegged...assistance amounts in the bill" to tuition.
From: Macias, Wendy

Sent: Monday, June 14, 2010 9:47AM
To: Finley, Steve
Subject: RE: FYl --Bloomberg article on gainful employment rule from Friday
Who needs a press release?
From: Finley, Steve

To: Macias, Wendy
Subject: FW: FYI-- Bloomberg article on gainful employment rule from Friday
From: Siegel, Brian

To: Jenkins, Harold; Finley, Steve
Subject: FYI-- Bloomberg article on gainful employment rule from Friday
Bloomberg
Obama Said to Delay For-Profit College Loan Rule (Update2)
June 11, 2010, 4:36 PM EDT

(Updates with closing stock prices in the fifth paragraph.)
By John Hechinger
June 11 (Bloomberg)- The Obama administration is delaying the release of a proposed rule that would cut federal
financial aid flowing to for-profit colleges, Congressional aides said today. Analysts said the move means the government
may back away from a regulation the industry is fighting.
The proposed rule, known as gainful employment, would disqualify Apollo Group Inc., ITT Educational Services Inc.,
Career Education Corp. and other for-profit colleges from receiving grants and loans if their graduates spend more than
8 percent of their starting salaries repaying student loans. Analysts said they had expected the rule to be released next
week. The aides declined to be named because they said weren' t authorized to release the information.
The U.S. Department ofEducation is seeking to protect taxpayers from loan defaults and to stop students from taking on
debt for degrees that don't pay off with higher incomes. For- profit colleges can receive up to 90 percent of their
revenue from federal grants and loans. The industry lobbied against the proposed rule, arguing that minority and lowincome students would lose access to college.
"We continue to pick up comments that suggest gainful employment may be reconsidered or watered down," Paul
Ginocchio, an analyst with Deutsche Bank said in a research note.
Education stocks rallied on analysts' reports citing the potential delay. Apollo, based in Phoenix, rose as much as $2.05,
or 4.1 percent, to $52.31 in Nasdaq Stock Market composite trading, closing at $51 .10 at 4 p.m. Career Education,
based in Hoffman Estates, Ulinois, gained as much as $1.55, or 5.9 percent, to $27.72 and later fell to $26.98. ITT,
based in Carmel, Indiana, gained as much as $4.44, or 4.6 percent, to $100.81 in New York Stock Exchange
Composite trading and closed at $97.92.
Recruiting Practices
The Education Department is postponing the regulation to have time to pull more data together in support of the
proposal, one of the Congressional aides said. Education Department spokesman Justin Hamilton declined to comment.
The Education Department is still expected to release other rules related to for-profits next week, Ginocchio said. A
preliminary version ofthe rules released in January would tighten regulation by restricting recruiting practices.
Senator Tom Harkin, chairman of the Health, Education, Labor and .Pensions Committee, said yesterday he plans to
hold hearings to examine the surge in federal grants and loans flowing to for-profit colleges.
Federal aid to for-profit colleges jumped to $26.5 billion last year from $4.6 billion in 2000, according to the Education
Department. Students attending for-profit schools are defaulting on their federal loans at a higher rate than those at
traditional schools, accorcting to the department.
Cooking School
Under the proposed gainful employment rule, a student projected to earn $18,000 a year as a starting cook would be
able to borrow about $10,000 in 10-year-loans for a cooking school, according to Matt Snowling, an analyst with FBR
Capital Markets in Arlington, Virginia. Culinary schools can now leave students with three or four times that level of
debt, Snowling said.
Eighteen percent of for-profit programs would be out of compliance under the gainful employment rule, meaning they
would have to shut down or cut tuition, according to a study commissioned by the Washington-based Career College
Association, which represents more than 1,400 for-profit colleges. Those programs enroll300,000 students, a third of
those attending career colleges, the study found.
From:
To:
CC:
Date:
Subject:
Macias Wendy
Finley, Steve
6/14/2010 9:46:34 AM
RE: FYI-- Bloomberg article on gainful employment rule from Friday
Who needs a press release?
From: Finley, Steve

To: Mac1as, Wendy
Subject: FW: FYI-- Bloomberg article on gainful employment rule from Friday
From: Siegel, Brian

Sent: Monday, June 14,2010 9:31AM
To: Jenkins, Harold; Finley, Steve
Subject: FYI-- Bloomberg article on gainful employment rule from Friday
Bloomberg
Obama Said to Delay For-Profit College Loan Rule (Update2)
June 11, 2010, 4:36 PM EDT

(Updates with closing stock prices in the fifth paragraph.)
By John Hechinger
June 11 (Bloomberg)- The Obama administration is delaying the release of a proposed rule that would cut federal
financial aid flowing to for-profit colleges, Congressional aides said today. Analysts said the move means the govemment
may back away from a regulation the industry is fighting.
The proposed rule, known as gainful employment, would disqualify Apollo Group Inc., ITI Educational Services Inc.,
Career Education Corp. and other for-profit colleges from receiving grants and loans if their graduates spend more than
8 percent of their starting salaries repaying student loans. Analysts said they had expected the rule to be released next
week. The aides declined to be named because they said weren' t authorized to release the information.
The U.S. Department ofEducation is seeking to protect taxpayers from loan defaults and to stop students from taking on
debt for degrees that don't pay off with higher incomes. For- profit colleges can receive up to 90 percent of their
revenue from federal grants and loans. The industry lobbied against the proposed rule, arguing that minority and lowincome students would lose access to college.
"We continue to pick up comments that suggest gainful employment may be reconsidered or watered down," Paul
Ginocchio, an analyst with Deutsche Bank said in a research note.
Education stocks rallied on analysts' reports citing the potential del.ay. Apollo, based in Phoenix, rose as much as $2.05,
or 4.1 percent, to $52.31 in Nasdaq Stock Market composite trading, closing at $51.10 at 4 p.m. Career Education,
based in Hoffman Estates, illinois, gained as much as $1.55, or 5.9 percent, to $27.72 and later fell to $26.98. ITT,
based in Carmel, Indiana, gained as much as $4.44, or4.6 percent, to $100.81 in New York Stock Exchange
Composite trading and closed at $97.92.
Recruiting Practices
The Education Department is postponing the regulation to have time to pull more data together in support of the
proposal, one of the Congressional aides said. Education Department spokesman Justin Hamilton declined to comment.
The Education Department is still expected to release other rules related to for-profits next week, Ginocchio said. A
preliminary version of the rules released in January would tighten regulation by restricting recruiting practices.
Senator Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee, said yesterday he plans to
hold hearings to examine the surge in federal grants and loans flowing to for-profit colleges.
Federal aid to for-profit colleges jumped to $26.5 billion last year from $4.6 billion in 2000, according to the Education
Department. Students attending for-profit schools are defaulting on their federal loans at a higher rate than those at
traditional schools, according to the department.
Cooking School
Under the proposed gainful employment rule, a student projected to earn $18,000 a year as a starting cook would be
able to borrow about $10,000 in 10-year-loans for a cooking school, according to Matt Snowling, an analyst with FBR
Capital Markets in Arlington, Virginia. Culinary schools can now leave students with three or four times that level of
debt, Snowling said.
Eighteen percent offor-profit programs would be out of compliance under the gainful employment rule, meaning they
would have to shut down or cut tuition, according to a study commissioned by the Washington-based Career College
Association, which represents more than 1,400 for-profit colleges. Those programs enroll300,000 students, a third of
those attending career colleges, the study found.
From:
To:
CC:
Date:
Subject:
Sann Ronald
Finley, Steve
9/14/2010 1:48:44 PM
RE: higher ed blog post on UOP study about for-profit institutions
Interesting. Thanks, Steve.
From: Finley, Steve

Sent: Tuesday, September 14, 2010 10:34 AM
To: Siegel, Brian; Burton, Vanessa; Scan.iffe, Dawn; Morelli, Denise; Marinucci, Fred; Jenkins, Harold; Woodward,
Jennifer; Wolff, Russell ; Sann, Ronald; Wanner, Sarah; Varnovitsky, Natasha
Cc: Yuan, Georgia
Subject: higher ed blog post on UOP study about for-profit institutions
http :1/higheredwatch.newamerica.netlblogmain
Guest Post: University of Phoenix Founder Forgets One Important Stakeholder-- Students
September 14, 2010

By Craig Smith
Anyone working on Capitol Hill these days knows that the for-profit higher education industry is spending millions of
dollars on lobbying in an effort to defeat, delay or weaken the Department ofEducation' s proposed regulations on
gainful employment. This should come as no surprise -- like bankers swarming House and Senate offices in an effort to
weaken proposed financial reforms in response to the sub-prime meltdown, for-profit colleges are businesses lobbying
to protect their main revenue stream. In this case that is federal tax dollars in the form of federal student aid. Nor is it a
surprise that the for-profit college sector is enlisting their employees to write comments opposing the regulations or
paying for high profile education summits in an effort to change people' s minds about recent reports of fraud and abuse
in their sector.
Recently, however, the University of Phoenix has ratcheted up the lobbying blitz with the help of a recent report issued
from the NEXUS Research and Policy Center. Now, as The Chronicle of Higher Education and CNBC have reported,
this report entitled "For-Profit Colleges and Universities: America's Least Costly and Most Efficient System of Higher
Education," has raised some eyebrows. NEXUS is funded by in-kind support from University ofPhoenix's parent
company the Apollo Group and grants from the John G. Sperling Foundation-- the foundation set up by the founder of
the University of Phoenix and the head of the Apollo Group. Furthermore, the report is authored by Jorge Klor de Alva,
President ofNEXUS and coincidentally a past-executive ofUniversity ofPhoenix and an Apollo board member.
In an effort to maintain a position of independence for the Center and avoid charges of astroturfing , KJor de Alva tried
to distance the Center and its report from current lobbying efforts around gainful employment. According to Chronicle
coverage:
Nexus sees its business as advocacy but "not lobbying," and Mr. Klor de Alva said he has no plans to distribute the
report to members of Congress, where lawmakers are continuing to hold hearings on the for-profit sector. But that
doesn't mean the report won't become another piece of fodder in the debate. "I suspect," he said, "that it will get
distributed over there."
Well how prescient of him. Any takers on who would have sent this report to all Congressional officers? Why, John
Sperling, of course.
The report arrived in Congressional staffers' email boxes as a PowerPoint presentation along with a message from
Sperling and a sample letter members of Congress could send to Education Secretary Arne Duncan opposing the gainful
employment regulations. Says Sperling:
The attached power point has been prepared by NEXUS, a research and policy institute whose primary focus is the forprofit sector of higher education. Given its commitment to fact based research, not special pleading, the power point
presents a rationale for the need to rethink the reforms proposed by the Education Department and the HELP
Committee using as an example the case of the University ofPhoenix, whose massive database on its operations and its
academics has been made available to NEXUS researchers.
It is unclear how a policy center whose only report is a piece of blatant advocacy for the organization that funds the
center is committed to "fact based research" and not "special pleading," but that is not the most outlandish claim in the
package. No, that comes in a broad finding of the report, which Sperling highlights in his letter:
Perhaps the most important finding of the case study is the fact that for-profit institutions operate at no cost to taxpayers
because the interest students pay on their federal loans plus the taxes paid by the institutions is greater than the Pell
Grants and all of the other state and federal subsidies received by the students and the institutions. Further, the study
shows that not only will the proposed reforms require a major increase in Department ofEducation oversight staff, they
will greatly lower the efficiency and raise the costs of the institutions in the sector- all at the expense of taxpayers.
Let's work through that. According to the Department ofEducation's proposed rule for Gainful Employment:
In 2009, the five largest for-profit institutions received 77 percent of their revenues from the Federal student aid
programs. This figure that does not include revenue received from certain Federal student loans (not authorized by the
Higher Education Act) that are exempted under the so-called 90/10 rule, or other revenue derived from government
sources including Federal Veterans' education benefits, Federal job training programs, and State student financial aid
programs. A recent study completed for the Florida legislature concluded that for-profit institutions were more expensive
for taxpayers on a per-student basis due to their high prices and large subsidies.
Let's be clear. For-profit colleges receive the vast majmity of their revenue and their profit from taxpayer money. They
generate this flow by charging high tuition, which results in their students receiving a disproportionate amount ofPell
Grant money and borrowing more on average and therefore carrying higher debt burdens. This leads to more significant
interest on those loans and overall loan repayments. To argue that this model is better because it is "revenue-neutral" for
the federal government is to turn the equation on its head.
Yes, the for-profit sector pays corporate taxes which means they must budget for that expenditure. How do they do
that? By making sure they generate enough revenue and that means making sure tuitions are high enough which means
more federal student aid dollars flowing to the institution. In short, to make sure they have enough money to pay the
federal government, they have to get more money from the federal government on the front end. I believe that is what we
call a zero-sum game . But to even enter into that argument is to miss the real point. Students.
To defend a business model of education in which it is okay for students to take on excessive loan debt (and, in too
many cases, default on those loans) while companies like Apollo make millions of dollars by arguing that it doesn't cost
the federal government anything is ludicrous if not immoral.
The goal of our federal financial aid system is not for the federal government and business to make money with the
welfare of students-particularly low-income and minority students-as an afterthought. The .financial aid system
envisioned in the Higher Ed Act is supposed to use the economies of scale at the federal government's disposal to help
all students get an affordable and equivalent education that will improve their economic and social well-being. lfthe forprofit sector wants to convince Congress and the publjc that they are not the next sub-prime mortgage crisis waiting to
happen and that they are vital to the effort of strengthening our system of higher education, perhaps they should
remember that helping students succeed without unmanageable loan debt, and not milking the federal student aid system
to improve their bottom-line, is the key.
Craig Smith is the Deputy Director of Higher Education for the American Federation of Teachers where his primary
responsibilities are field services and commurucations with an emphasis on political and legislative action. Prior to joining
the AFT's national staff, he was a full-time faculty member and local union president at Salt Lake Commuruty College.
Craig blogs regularly on AFT's Faculty and College Excellence website. His views are his own and not necessarily
those of the New America Foundation.
From:
To:
CC:
Date:
Subject:
Finley Steve
Sann Ronald
3/15/2010 10:28:40 AM
RE: In Hard Times, Lured Into Trade School and Debt
(b)(5)
From: Sann, Ronald

Sent: Monday, March 15, 2010 10:28 AM
To: Finley, Steve
Subject: RE: In Hard Times, Lured Into Trade School and Debt
From: Finley, Steve

To: Sann, Ronald
(b)(5)
From: Sann, Ronald

Sent: Monday, March 15, 2010 9:13AM
To: Siegel, Brian; Burton, Vanessa~ Scaniffe, Dawn; Morelli, Denise; Marinucci, Fred; Jenkins, Harold; Woodward,
Jennifer; Wolff, Russell; Wanner, Sarah; Finley, Steve; Varnovitsky, Natasha
Subject: In Hard Times, Lured Into Trade School and Debt
FYI--- This article was on the front page of yesterday' s New York Times.
The New Poor
In Hard Times, Lured Into Trade School and Debt

By PETERS. GOODMAN
Published: March 13, 2010
One fast-growing American industry has become a conspicuous beneficiruy of the recession : for-profit colleges and
trade schools.
At institutions that train students for careers in areas like health care, computers and food seiVice, enrollments are soaring
as people anxious about weak job prospects borrow aggressively to pay tuition that can exceed $30,000 a year.
But the profits have come at substantial taxpayer expense while often delivering dubious benefits to students, according
to academics and advocates for greater oversight of financial aid. Critics say many schools exaggerate the value of their
degree programs, selling young people on dreams of middle-class wages while setting them up for default on untenable
debts, low-wage work and a struggle to avoid poverty. And the schools are harvesting growing federal student aid
dollars, including Pell grants awarded to low-income students.
"If these programs keep growing, you' re going to wind up with more and more students who are graduating and can't
find meaningful employment," said Rafael I. Pardo, a professor at Seattle University School ofLaw and an expert on
educational finance. "They can't generate income needed to pay back their loans, and they're going to end up in financial
distress."
For-profit trade schools have long drawn accusations that they overpromise and underdeliver, but the woeful economy
has added to the industry's opportunities along with the risks to students, according to education experts. They say these
schools have exploited the recession as a lucrative recruiting device while tapping a larger pool of federal student aid.
"They tell people, 'If you don't have a college degree, you won't be able to get a job,' " said Amanda Wallace, who
worked in the financial aid and admissions offices at the Knoxville, Tenn., branch ofiTT Technical Institute , a chain of
schools that charge roughly $40,000 for two-year associate degrees in computers and electronics. "They tell them,
' You'll be making beaucoup dollars afterward, and you' ll get all your financial aid covered.'"
Ms. Wallace left her job at ITT in 2008 after five years because she was uncomfortable with what she considered
deceptive recruiting, which she said masked the likelihood that graduates would earn too little to repay their loans.
As a financial aid officer, Ms. Wallace was supposed to counsel students. But candid talk about job prospects and debt
obligations risked the wrath of management, she said.
"If you said anything that went against what the recruiter said, they would threaten to fire you," Ms. Wallace said. "The
representatives would have already conned them into doing it, and you had to just keep your mouth shut."
A spokeswoman for the school' s owner, ITT Educational SeiVices , Lauren Littlefield, said the company had no
comment.
The average annual tuition for for-profit schools this year is about $14,000, according to the College Board . The forprofit educational industry says it is fulfilling a vital social function, supplying job training that provides a way up the
economic ladder.
"When the economy is rough and people are threatened with unemployment, they look to education as the way out,"
said Harris N. Miller, president of the Career College Association, which represents approximately 1,400 such
institutions. "We' re preparing people for careers."
Concerned about aggressive marketing practices, the Obama administration is toughening rules that restrict institutions
that receive federal student aid from paying their admissions recruiters on the basis of enrollment numbers.
The administration is also tightening regulations to ensure that vocational schools that receive aid dollars prepare students
for "gainful employment." Under a proposal being floated by the Department of Education , programs would be bruTed
from loading students with more debt than justified by the likely salaries of the jobs they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there is a
heightened level of hazard," said Robert Shireman, a deputy under secretary of education. "There is a lot ofPell grant
money out there, and we need to make sure it's being used effectively."
The administration's push has provoked fierce lobbying from the for-profit educational industry, which is seeking to
maintain flexibility in the rules.
A Lucrative Business
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federaJ loans and grants,
and the percentages have been climbing sharply.

The Career Education Corporation , a publicly traded global giant, last year reported revenue of $1.84 billion. Roughly
80 percent came from federal loans and grants, according to BMO Capital Markets, a research and trading firm. That
was up from 63 percent in 2007.
The Apollo Group- which owns the for-profit University ofPhoenix- derived 86 percent of its revenue from federal
student aid last fiscal year, according to BMO. Two years earlier, it was 69 percent.
For-profit schools have proved adept at capturing Pel! grants, which are a centerpiece of the Obama administration's
efforts to make higher education more affordable. The administration increased financing for Pell grants by $17 billion for
2009 and 2010 as part of its $787 billion stimulus package .
Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants, according to the Department of
Education, less than went to students at two-year public institutions. By the 2011-12 school year, the administration now
estimates, students at for-profit schools should receive more than $10 billion in PeU grants, more than their public
counterparts. (Those anticipated increases may shrink, depending on the outcome of wrangling in Congress over health
care and student lending.)
Enrollment at for-profit trade schools expanded about 20 percent a year the last two years, more than double the pace
from 2001-7, according to the Career College Association.
Mr. Miller, the association's president, said for-profit schools were securing large numbers ofPetl grants because their
financial aid offices were diligent and because the schools served many low-income students.
But financial aid experts say the surge of federal money reaching such institutions reflects something else: their aggressive,
sometimes deceitful recruiting practices.
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for
training programs offered by WyoTech, a chain of trade schools owned by Corinthian Colleges Inc., a publicly traded
company that last year reported revenue of$1.3 billion.
After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto body
refinishing and upholstering technology, a nine-month program that cost about $30,000.
Mr. West blanched at the tuition, he recalled, but the representative assured him the program amounted to an antidote to
hard economic times.
"They said they had a very high placement rate, somewhere around 90 percent," he said. "That was one of the key
factors that caused me to go there. They said I would be earning $50,000 to $70,000 a year."
Some 14 months after he completed the program, Mr. West, 21 , has failed to find an automotive job. He is working for
$12 an hour weatherizing foreclosed houses.
With loan payments reaching $600 a month, he is working six and seven days a week to keep up.
"I've got $30,000 in student loans, and I really don 't have much to show for it," he said. "It's really frustrating when
you're trying to better yourself and you wind up back at Square One."
Corinthian says it bars its recruiters from making promises about pay.
"The majority of our students graduate," said a spokeswoman, Anna Marie Dunlap, in a written statement. "Most see a
significant earnings increase."
The increase in market opportunities for the for-profit education industry comes as governments spend less on education.
In states like California, community colleges have been forced to cut classes just when demand is greatest.
"This is creating a very ripe environment for the for-profit schools to pick off more students," said Lauren Asher,
president of the Institute for College Access & Success , a nonprofit research group based in California that seeks to
make higher education more affordable. "The risks of exploitation are higher, and the potential rewards of th.ose
practices are higher."
For-profit culinary schools have long drawn criticism for leading students to rack up large debts. Now, they are enjoying
striking growth. Enrollment at the 17 culinary schools of the Career Education Corporation -most of them operated
under the name Le Cordon Bleu- swelled by 31 percent in the final months of last year from a year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland, Ore., to seek information, he
was feeling pressure to start a new career. It was 2008, and his Florida mortgage business was a casualty of the housing
bust. An associate degree in culinary arts from a school in the food-obsessed Pacific Northwest seemed like a portal to
a new career.
The tuition was daunting- $41 ,000 for a 15-month or 21-month program- but he said the admissions recruiter
portrayed it as the entrance price to a stable life.
"The recruiter said, ' The way the economy is, with the recession, you need to have a safe way to be sure you will always
have income,'" Mr. Newburg said." 'In today 's market, chefs will always have a job, because people will always have
to eat. ' "
According to Mr. Newburg, the recruiter promised the school would help him find a good job, most likely as a line
cook, paying as much as $38,000 a year.
Last summer, halfway through his program and already canying debts of about $10,000, Mr. Newburg was alarmed to
see many graduates taking jobs paying as little as $8 an hour washing dishes and busing tables, he said. He dropped out
to avoid more debt.
"They have a basic money-making machine," Mr. Newburg said.
More Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or salaries. The school requires
students to sign disclosures stating that they understand that its programs afford no guarantees.
But promotional materials convey a sense of promise.
"Our students are given the tools needed to become the future leaders in the industry," proclaims the Le Cordon Bleu
Web site . "Many graduates have attained positions of responsibility, visibility, and entrepreneurship soon after
completing their studies."
The job placement results that the school files with accrediting agencies suggest a different outcome. From July 2007 to
June 2008, students who graduated from the culinary arts associate degree program landed jobs that paid an average of
$21 ,000 a year, or about $10 an hour. Oregon's minimum wage is $8.40 an hour.
The job placement list is cited in a class-action lawsuit filed against the Portland school- previously known as Western
Culinary Institute- by graduates who allege fraud, breach of contract and unlawful trade practices. Executives at
Career Education denied the allegations while asserting it would be wrong to judge the school on the basis of its
graduates' firstjobs.
"You go out in the industry and work your way up," said Brian R. Williams, the company's senior vice president for
culinary arts.
On a recent morning at the campus in Portland, hundreds of students donning chefs whites labored in demonstration
kitchens stocked with stainless steel countertops and commercial gas ranges. A chef inspected plates ofboeuf
Bourgogne and risotto Milanese. Students melted and pulled sugar into multicolored ribbons. Others used a chainsaw to
sculpture blocks of ice into decorative centerpieces.
"It's employable skills; that' s what we teach people here," said the school president, Jon Alberts. "We try to give them
as much of an industty experience in the classroom as possible."
But several local chefs said the program merely simulated what students could learn in entry-level jobs.
"When they graduate and come in the kitchen, I tell them, Tm going to treat you like you don't know anything,'" said
Kenneth Giambalvo, executive chef at Bluehow, an upscale restaurant in Portland' s Pearl District. "It doesn 't really give
them any edge."
What the school does give many students is debt, often at double-digit interest rates - debt that even bankruptcy
cannot erase without a lengthy, low-odds legal proceeding.
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he was shocked by
the terms of the aid package the school had arranged for him: One loan, for nearly $14,000, carried a $7,327 "finance
charge" and a 13 percent interest rate.
"They told me that halfway through the program, I could probably refinance to a lower rate," he said.
When he ttied to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Willian1s' s case, citing privacy restrictions and saying he had not signed a
wruver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information for four graduates
"with whom we hope you' ll touch base for important perspective." One came with a wrong number. A second had
graduated 15 years ago.
A third, Cherie Thompson, called the program "a really positive experience" but declined to discuss her debts or
earnings. The fourth, Ericsel Tan, graduated in 2003 and later earned $42,000 a year overseeing catering at a convention
center near Seattl e. He said his success reflected his seven years of kitchen experience prior to cui inary school.
Career Education notes that only 5. 9 percent of the federal loans to students at the Western Culinary Institute that began
to come due in 2007 -the latest available data- are listed in default by the Department of Education.
But default rates have traditionally reflected only those bonowers who fail to pay in the first two years payments are due.
The Department ofEducation has begun calculating default rates for three years. By that yardstick, Western Culinary's
default rate more than doubles, to 12.5 percent.
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie Mae, the
student lending giant.
These loans are risky: Career Education and Corinthian recently told investors they had set aside roughly half the money
allocated this year for private lending to cover anticipated bad debts.
Financial aid experts say such high rates of expected default prove that graduates will not earn enough to make their
payments, yet the loans make sense for the for-profit school industry by enabling the flow of taxpayer funds to their
coffers: they satisfy federal requirements that at least 10 percent of tuition money come from students directly or from
private sources.
"They're making so much money offtheir federal student loans and grants that they can afford to write off their own
loans," said Ms. Asher of the Institute for College Access & Success.
A version of this article appeared in print on March 14, 2010, on page A1 of the New York edition.
http://www.nytimes.com/2010/03/l4/business/14schools.html
From:
To:
CC:
Date:
Subject:
Finley Steve
Sann Ronald
3/15/2010 10:25:44 AM
(b)(5)
From: Sann, Ronald

Jennifer; Wolff, Russell; Wanner, Sarah; Finley, Steve; Varnovitsky, Natasha
Subject In Hard Times, Lured Into Trade School and Debt
The New Poor

By PETERS. GOODMAN
One fast-growing American industry has become a conspicuous beneficiary of the recession : for-profit colleges and
trade schools.
At institutions that train students for careers in areas like health care, computers and food service, enrollments are soaring
dollars, including Pell grants awarded to low-income students.
"If these programs keep growing, you' re going to wind up with more and more students who are graduating and can't
educational finance. "They can't generate income needed to pay back their loans, and they' re going to end up in financial
distress."
schools have exploited the recession as a lucrative recruiting device while tapping a larger pool of federal student aid.
"They tell people, 'Ifyou don't have a college degree, you won't be able to get a job,' " said Amanda Wallace, who
schools that charge roughly $40,000 for two-year assoc1ate degrees in computers and electronics. "They tell them,
' You'll be making beaucoup dollars afterward, and you' ll get all your financial aid covered.'"
As afinanc1al aid officer, Ms. Wallace was supposed to counsel students. But candid talk about job prospects and debt
A spokeswoman for the school's owner, ITT Educational Services , Lauren Littlefield, said the company had no
comment.
The average annual tuition for for-profit schools this year is about $14,000, according to the College Board. The forprofit educati.onal industry says it 1s fulfilling a vital social function, supply1ngjob training that provides a way up the
economic ladder.
institutions. "We're preparing people for careers."
for "gainful employment." Under a proposal being floated by the Department ofEducat1on , programs would be barred
from loading students w1th more debt than justified by the likely salaries of the jobs they would pursue.
"During a recession, w1th increased demand for education and more anxiety about the ability to get a job, there is a
The adm1nistration's push has provoked fierce lobbying from the for-profit educational industry, which is seeking to
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal loans and grants,
The Apollo Group- which owns the for-profit University ofPhoenix- derived 86 percent of 1ts revenue from federal
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama administration's
efforts to make higher education more affordable. The administration increased financing for Pell grants by $17 b111ion for
estimates, students at for-profit schools should receive more than $10 billion in Pell grants, more than their public
counterparts. (Those antic1pated increases may shrink, depending on the outcome of wrangling in Congress over health
care and student lending .)
Mr. Miller, the assoc1ation's president, said for-profit schools were securing large numbers ofPell grants because their
Jefffey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for
training programs offered by WyoTech, a chain of trade schools owned by Corinthian Colleges Inc. , a publicly traded
company that last year reported revenue of$1.3 billion.
refimshing and upholstering technology, a nine-month program that cost about $30,000.
Some '14 months after he completed the program, Mr. West, 21 , has failed to find an automotive job. He is working for
"I've got $30,000 in student loans, and I really don't have much to show for it," he said. "It's really frustrating when
make higher education more affordable. "The risks of exploitation are higher, and the potential rewards of those
striking growth. Enrollment at the 17 culinary schools of the Career Education Corporation- most of them operated
under the name Le Cordon Bleu- swelled by 31 percent in the final months of last year from a year earlier.
a new career.
The tuition was daunting- $41,000 for a 15-month or 21-month program- but he said the admissions recruiter
"The recruiter said, ' The way the economy is, with the recession, you need to have a safe way to be sure you will always
have income,'" Mr. Newburg said." 'In today's market, chefs will always have a job, because people will always have
to eat.' "
Last summer, halfway through his program and already carrying debts of about $10,000, Mr. Newburg was alarmed to
to avoid more debt.
Web site . "Many graduates have attained positions of responsibility, visibility, and entrepreneurship soon after
June 2008, students who graduated from the cui inary arts associ ate degree program Ianded jobs that paid an average of
graduates' first jobs.
culinary arts.
On a recent morning at the campus in Portland, hundreds of students donning chefs whites labored in demonstration
Bourgogne and risotto Milanese. Students melted and pulled sugar into multicolored ribbons. Others used a chainsaw to
"It's employable skills; that's what we teach people here," said the school president, Jon Alberts. "We try to give them
as much of an industry experience in the classroom as possible."
"When they graduate and come in the kitchen, I tell them, 'I'm going to treat you like you don't know anything,'" said
Kenneth Giambalvo, executive chef at Bluehour, an upscale restaurant in Portland' s Pearl District. "It doesn 't really give
them any edge."
What the school does give many students is debt, often at double-digit interest rates- debt that even bankruptcy
When TJ Williams anived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he was shocked by
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams's case, citing privacy restrictions and saying he had not signed a
waiver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with his motl1er.
After Graduation
"with whom we hope you' ll touch base for important perspective." One came with a wrong number. A second had
center near Seattle. He said his success reflected his seven years of kitchen experience prior to culinary school.
Career Education notes that only 5.9 percent of the federal loans to students at the Western Culinary Institute that began
to come due in 2007- the latest available data- are listed in default by the Department of Education.
But default rates have traditionally reflected only those borrowers who fail to pay in the first two years payments are due.
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie Mae , the
allocated this year for private lending to cover anticipated bad debts.
private sources.
"They' re making so much money off their federal student loans and grants that they can afford to write off their own
A version of this article appeared in print on March 14,2010, on page A1 of the New York edition.
http :1/www.nytimes.com/20 10/03/14/business/14schools.html
From:
To:
CC:
Date:
Subject:
Sann Ronald
Finley Steve
3/15/2010 10:27:46 AM
l(b)(S)
From: Finley, Steve

To: Sann, Ronald
(b)(5 )
From: Sann, Ronald

Jennifer; Wolff: Russell; Wanner, Sarah; Finley, Steve; Vamovitsky, Natasha
Subject: In Hard Times, Lured Into Trade School and Debt
The New Poor

By PETERS. GOODMAN
One fast-growing American industry has become a conspicuous beneficiary of the recession : for-profit colleges and
trade schools.
At institutions that train students for careers in areas like health care, computers and food service, enrollments are soaring
dollars, includingPell grants awarded to low-income students.
"If these programs keep growing, you're going to wind up with more and more students who are graduating and can' t
educational finance. "They can' t generate income needed to pay back their loans, and they' re going to end up in financial
distress."
schools have exploited the recession as a Iucrative recruiting device while tapping a larger pool of federal student aid.
"They tell people, 'If you don't have a college degree, you won't be able to get a job,' " said Amanda Wallace, who
schools that charge roughly $40,000 for two-year associate degrees in computers and electronics. "They tell them,
'You'll be making beaucoup dollars afteiWard, and you' ll get all your financial aid covered.'"
As a financial aid officer, Ms. Wallace was supposed to counsel students. But candid talk about job prospects and debt
A spokeswoman for the school's owner, ITT Educational Services , Lauren Littlefield, said the company had no
comment.
The average annual tuition for for-profit schools this year is about $14,000, according to the College Board. The forprofit educational industry says it is fulfilling a vital social function, supplying job training that provides a way up the
economic ladder.
institutions. "We're preparing people for careers."
for "gainful employment.'' Under a proposal being floated by the Department of Education , programs would be barred
from loading students with more debt than justified by the likely salaries of the jobs they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there is a
The administration's push has provoked fierce lobbying from the for-profit educational industry, which is seeking to
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal loans and grants,
The Apollo Group- which owns the for-profit University ofPhoenix- derived 86 percent of its revenue from federal
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama administration's
efforts to make higher education more affordable. The administration increased financing for Pell grants by $17 billion for
estimates, students at for-profit schools should receive more than $10 billion in Pell grants, more than their public
counterparts. (Those anticipated increases may shrink, depending on the outcome of wrangling in Congress over health
care and student lencting .)
Mr. Miller, the association' s president, said for-profit schools were securing large numbers ofPell grants because their
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for
training programs offered by WyoTech, a chain of trade schools owned by Corinthian Colleges Inc. , a publicly traded
company that last year reported revenue of$1 .3 billion.
refinishing and upholstering technology, a nine-month program that cost about $30,000.
Some 14 months after he completed the program, Mr. West, 21 , has failed to find an automotive job. He is working for
"I've got $30,000 in student loans, and I really don't have much to show for it," he said. "It's really frustrating when
make higher education more affordable. "The risks of exploitation are higher, and the potential rewards of those
striking growth. Enrollment at the 17 culinary schools of the Career Education Corporation- most of them operated
under the name Le Cordon Bleu - swelled by 31 percent in the final months of last year from a year earlier.
a new career.
The tuition was daunting- $41,000 for a 15-month or 21-month program- but he said the admissions recruiter
"The recruiter said, 'The way the economy is, with the recession, you need to have a safe way to be sure you will always
have income,'" Mr. Newburg said." 'In today' s market, chefs will always have a job, because people will always have
to eat. ' "
Last summer, halfway through his program and already carrying debts of about $10,000, Mr. Newburg was alarmed to
to avoid more debt.
Web site. "Many graduates have attained positions of responsibility, visibility, and entrepreneurship soon after
June 2008, students who graduated from the culinary arts associate degree program landed jobs that paid an average of
graduates' first jobs.
culinary arts.
On a recent morning at the campus in Portland, hundreds of students donning chef's whites labored in demonstration
Bourgogne and risotto Milanese. Students melted and pulled sugar into multicolored ribbons. Others used a chain saw to
"It's employable skills; that's what we teach people here," said the school president, Jon Alberts. "We try to give them
as much of an industry experience in the classroom as possible."
"When they graduate and come in the kitchen, I tell them, 'I'm going to treat you like you don't know anything,'" said
Kenneth Giambalvo, executive chef at Bluehour, an upscale restaurant in Portland's Pearl District. "It doesn't really give
them any edge."
What the school does give many students is debt, often at double-digit interest rates- debt that even bankruptcy
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he was shocked by
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams's case, citing privacy restrictions and saying he had not signed a
wruver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with his motl1er.
After Graduation
"with whom we hope you' ll touch base for impmtant perspective." One came with a wrong number. A second had
center near Seattle. He said his success reflected his seven years of kitchen experience prior to culinary school.
Career Education notes that only 5.9 percent of the federal loans to students at the Western Culinary Institute that began
to come due in 2007- the latest available data - are listed in default by the Department of Education.
But default rates have traditionally reflected only those borrowers who fail to pay in the first two years payments are due.
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie Mae , the
allocated this year for private lending to cover antic1pated bad debts.
private sources.
"They're making so much money offtheir federal student loans and grants that they can afford to write off their own
A version of this article appeared in print on March 14, 2010, on page Al of the New York edition.
http://www.nytimes.com/2010/03/14/business/14schools.html
From: Finley Steve

To: Macias, Wendy
CC:
Date: 6/3/2009 12:42:26 PM
Subject: RE: interesting analysis
I N'"~'''""'"
From: Macias, Wendy
Sent: Wednesday, June 03, 2009 11:41 AM
To: Finley, Steve
From: Finley, Steve

To: Macias, Wendy
Subject: interesting analysis
From the articles I sent earlier:
We have spoken with a number of sources and obtained some color with respect to what may be behind some
of the topics chosen for discussion. One career officer told Inside .Higher Ed's Doug Lederman
http://www.insidehighered.com/news/2009/05/27/qt# 199734 that some topics are the result of there being "a
new team in town" (meaning newly-appointed political officers) that have a particular .interest in exploring some
topics.
Satisfactory Academic Progress
We don't believe that proprietary schools already focused on outcomes assessment likely to have anything to
fear from this discussion which, we suspect, may be geared more towards traditional schools that have
eschewed being measured.

Incentive Compensation
With respect to incentive compensation, this same source told Inside Higher Ed, that while ED program reviews
have revealed compliance with the safe harbor provisions, they have also uncovered practices that while
allowed, some in the department may find distasteful. Though we are not aware of specifics, investors might
consider some of the University ofPhoenix (NASDAQ: APOL; Buy) practices ridiculed by Citron Research,
including goofy contests, etc. It is not inconceivable to imagine that incentive comp practices could be made
even less nuanced and more straightforward (in the vein of Strayer) for example.
Gainful Employment
For proprietary schools, eligibility for Title IV requires, among other things, that the schools "prepare students
for gainful employment in a recognized occupation." As the ED official told Inside Higher Ed, the Department
has "never put any meat on those bones," meaning that the requirement of this provision have never been
explicitly spelled out, though the OIG has, at times, identified schools that it believes have been in violation of
this statute. Nationally-accredited schools (ITT, Corinthian) have little to fear from this discussion as their
accreditors already hold them precisely accountable in the regard. Neither, we think, does regionally-accredited
DeVry, which hold itself to standards comparable to those by which national accreditors judge schools. But
other regionally-accredited schools that have not traditionally focused on placement could potentially face
additional requirements.
State Authorization
This, we understand, likely related to the situation in California, which in 2007 saw its previously onerous
regulatory framework expire without an effective replacement. All proprietary schools are well-accustomed to
state oversight and we see this as unlikely to impose a terrible burden, though new activity in the state could
potentially be placed on hold pending resolution of the situation.
Definition of a Credit Hour
The implication of this discussion is unclear though we suspect the topic is likely to be innocuous. We
understand the definition is important to the smoother application ofPell. Given the government's priority is on
maximizing Pell to deserving students, we don't anticipate there being a material, negative change as a result
of any adjustment to the status quo.
Verification of Student Aid Information
This, we understand, is part of the government's effort to simplify FAFSA and likely not of concern to the group.
Definition ofHigh School Diploma
This topic, again, could be innocuous, or it could potentially impact those schools, like Corinthian Colleges
(/NASDAQ: COCO~ Buy) that include some Ability-To-Benefit students, whereby the students receive their high
school diploma concurrent with the associate degree. We believe the goals of these types of programs,
provided they are administered in a responsible way, are consistent with the broader goals ofED and so we
don't anticipate any disruption, but we'll have to wait to learn more.
Conclusion
Given that we believe the stock's already include a "doomsday" regulatory scenario based on the fears that
have been circulating for weeks, we see the emergence of these new neg-reg topics as a positive in that they
provide a process for getting these issues behind the group. We continue to believe what we believed before -that scaring private capital away from the post-secondary sector is not consistent with the goals of the Obama
administration to expand college participation and, by necessity, the available student seats in the sector.
Considering the administration's rational and reasonable approach to other sectors, we do not believe that a
"take-down" is in the works. Rather, we think that whatever changes are made, will likely be moderate and
incremental from current practices. While it is conceivable that changes to incentive compensation practices
could slow growth in some areas, we note that Strayer Education (NASDAQ: STRA; Buy) which employs some
of the most conservative compensation practices in the sector, continues to report consistent 20%+ growth and
is clearly not adversely impacted by its uncreative approach to compensation.
From:
To:
CC:
Date:
Macias Wendy
Finley, Steve
6/3/2009 11:41:44 AM
I"'"'"''""'"
From: Finley, Steve
To: Macias, Wendy
Subject: interesting analysis
From the articles I sent earlier:
We have spoken with a number of sources and obtained some color with respect to what may be behind some
of the topics chosen for discussion. One career officer told Inside Higher Ed's Doug Lederman
http://www.insidehighered.com/news/2009/05/27/qt#l99734 that some topics are the result ofthere being "a
new team in town" (meaning newly-appointed political officers) that have a particular interest in exploring some
topics.
Satisfactory Academic Progress
We don't believe that proprietary schools already focused on outcomes assessment likely to have anything to
fear from this discussion which, we suspect, may be geared more towards traditional schools that have
eschewed being measured.
Incentive Compensation
With respect to incentive compensation, this same source told Inside Higher Ed, that while ED program reviews
have revealed compliance with the safe harbor provisions, they have also uncovered practices that while
allowed, some in the department may find distasteful. Though we are not aware of specifics, investors might
consider some of the University ofPhoenix (NASDAQ: APOL; Buy) practices ridiculed by Citron Research,
including goofy contests, etc. It is not inconceivable to imagine that incentive comp practices could be made
even less nuanced and more straightforward (in the vein of Strayer) for example.
Gainful Employment
For proprietary schools, eligibility for Title IV requires, among other things, that the schools "prepare students
for gainful employment in a recognized occupation." As the ED official told Inside Higher Ed, the Department
has "never put any meat on those bones," meaning that the requirement of this provision have never been
explicitly spelled out, though the OIG has, at times, identified schools that it believes have been in violation of
this statute. Nationally-accredited schools (ITT, Corinthian) have little to fear from this discussion as their
accreditors already hold them precisely accountable in the regard. Neither, we think, does regionally-accredited
DeVry, which hold itself to standards comparable to those by which national accreditorsjudge schools. But
other regionally-accredited schools that have not traditionally focused on placement could potentially face
additional requirements.
State Authorization
This, we understand, likely related to the situation in California, which in 2007 saw its previously onerous
regulatory framework expire without an effective replacement. AJI proprietary schools are well-accustomed to
state oversight and we see this as unlikely to impose a terrible burden, though new activity in the state could
potentially be placed on hold pending resolution of the situation.
Definition of a Credit Hour
The implication of this discussion is unclear though we suspect the topic is likely to be innocuous. We
understand the definition is important to the smoother application ofPell. Given the government's priority is on
maximizing Pell to deserving students, we don't anticipate there being a material, negative change as a result
of any adjustment to the status quo.
Verification of Student Aid Information
This, we understand, is part of the government's effort to simplify FAFSA and likely not of concern to the group.
Definition ofl-ligh School Diploma

This topic, again, could be innocuous, or it could potentially impact those schools, like Corinthian Colleges
(/NASDAQ: COCO; Buy) that include some Ability-To-Benefit students, whereby the students receive their high
school diploma concurrent with the associate degree. We believe the goals of these types of programs,
provided they are administered in a responsible way, are consistent with the broader goals ofED and so we
don't anticipate any disruption, but we'll have to wait to learn more.
Conclusion
Given that we believe the stock's already include a "doomsday" regulatory scenario based on the fears that
have been circulating for weeks, we see the emergence of these new neg-reg topics as a positive in that they
provide a process for getting these issues behind the group. We continue to believe what we believed before -that scaring private capital away from the post-secondary sector is not consistent with the goals of the Obama
administration to expand college participation and, by necessity, the available student seats in the sector.
Considering the administration's rational and reasonable approach to other sectors, we do not believe that a
"take-down" is in the works. Rather, we think that whatever changes are made, will likely be moderate and
incremental from current practices. While it is conceivable that changes to incentive compensation practices
could slow growth in some areas, we note that Strayer Education (NASDAQ: STRA; Buy) which employs some
of the most conservative compensation practices in the sector, continues to report consistent 20%+ growth and
is clearly not adversely impacted by its uncreative approach to compensation.
From:
To:
CC:
Date:
Subject:
Finley Steve
Macias, Wendy
5/4/2010 12:34:54 PM
RE: New Bloomberg article today: Obama Plans New Rules as For-Profit Colleges Mobilize
INonresponsive
-----Original Message----From: Macias, Wendy
Sent: Tuesday, May 04, 2010 12:32 PM
To: Finley, Steve
Subject: RE: New Bloomberg article today: Obama Plans New Rules as For-Profit Colleges Mobil ize
"The Education Department plans to issue the regulations
without Congressional approval, unlike student-loan legislation
which passed in March." ???????????
From: Finley, Steve

Sent: Tuesday, May 04, 2010 12:01 PM
To: Macias, Wendy
Subject: FW: New Bloomberg article today: ObamaPlans New Rules as For-Profit Colleges Mobilize
FYI
*********************************************************************
Obama Plans New Rules as For-Profit Colleges Mobilize for Fight

2010-05-04 04:02:00.0 GMT
By John Hechinger, Daniel Golden and John Lauerman

May 4 (Bloomberg)-- The Obama Administration is gearing up
to produce tougher regulations that may reduce the amount of
federal financial aid flowing to for-profit colleges, cutting
the companies' annual revenue growth by as much as a third.
In response, the $29 billion industry and its supporters
including Republican Senators have enlisted top Washington
lobbyists and are courting black and Hispanic legislators to
fight the proposed rules scheduled to be released as early as
this month. The companies draw students from low-income and
minority communities.
Federal aid to for-profit colleges has become an issue as it
has jumped to $26.5 billion in 2009 from $4.6 billion in 2000,
according to the Education Department, prompting concern that
these students are taking on too much debt. Twelve highereducation stocks fell an average of7.4 percent for the week
ended April30, according to Bloomberg data, following an April
28 speech by an Education Department official critical of forprofit colleges. In the same period, the Standard & Poor's 500
Index dropped 1.7 percent.
"There's an attempt to manage" for-profit colleges by the
Obama administration, Robert Wetenhall, an analyst with BMO
Capital Markets in New York, said in a telephone interview. The
education companies' influence in Washington has "radically
changed," from the years of the Bush administration, he said.
The tougher rules, which are expected to be released for
public comment in the next several weeks, would require ITT
Educational Services Inc., Career Education Corp. and Apollo
Group Inc.'s University ofPhoenix to show that their graduates
earn enough money to pay off their student loans. lffor-profit
colleges can't meet the standard, they could lose federal
financial aid, which typically makes up three-quarters of their
revenue.
Tuition Increases
The proposed rules may disqualify for-profits from
receiving federal financial aid if their graduates must spend
more than 8 percent of their starting salaries on repaying
student loans. The regulations may slow or even halt tuition
increases at ITT, Education Management Corp., Lincoln
Educational Services, Universal Technical Institute, and Career
Education because many graduates take low-paying jobs in
criminal justice, cooking and medical office work, Trace Urdan,
an analyst at Signal Hill Capital Group in San Francisco, said
in an interview.
Education companies have increased revenue by as much as 15
percent and enrollment by 8 to 10 percent on an annual basis,
while raising tuition about 4 to 6 percent a year, Urdan said.
The new rules may slow their revenue growth by one third by
limiting their ability to raise tuition.
Pricing Power
"The days of 4 to 6 percent annual tuition price increases
are over," Urdan said. "The new proposed rules will bring some
school's power to increase prices down to zero."
Apollo closed at $58.32, up 91 cents, or 1.6 percent, in
New York Stock Exchange composite trading yesterday. ITT closed
at $104.22, up $3.09, or 3.1 percent. Career Education rose $97
cents or 3.3 percent to $30.24.

The Education Department plans to issue the regulations
without Congressional approval, unlike student-loan legislation
which passed in March.
"Congress has not held a single hearing on these new
enforcement mechanisms," Alexa Marrero, spokeswoman for John
Kline, the ranking Republican on the House education committee,
said in an e-mail. "No research has been offered by the
department to justify the controversial proposal."
U.S. Senator Lamar Alexander, who chairs the Senate
Republican Conference, is trying to persuade U.S. Education
Secretary Arne Duncan to reconsider the regulations, said a
Republican aide on the education committee. If that doesn 't work,
Alexander, who is on the education and appropriation committees,
would try to kill the regulations by cutting off funding, the
aide said.
Enrollment in for-profit colleges increased to 1.8 million
in 2008 from 673,000 in 2000. industry revenue will rise to
$29.2 billion this year from $9 billion in 2000, said Jeffrey
Silber, an analyst for BMO Capital Markets in New York. The
industry has grown in part by marketing to low-income students,
including the homeless, who qualify for federal grants and loans.
Regulations' Impact
The new regulations would shut 300,000 students out of
classes and eliminate 2,000 educational programs, according to a
study commissioned by the Washington-based Career College
Association, which represents more than 1,400 for-profit
coll eges.
The proposal would reduce opportunities for women and
racial minorities who want to go to college, the group said.
For-profit coll eges have proposed alternative regulations that
would require companies to disclose more information about
students' debt and job prospects.
The Career College Association has retained the Podesta
Group, a Washington lobbying firm headed by Anthony Podesta,
whose brother, John, was President Bill Clinton's chief of staff,
according to federal filings. Clinton will be a keynote speaker
at the association's annual meeting in June. Podesta's Paul
Brathwaite, former executive director of the Congressional Black
Caucus, is also lobbying on the association 's behalf, records
show.
Phoenix Scholarships
The University of Phoenix, the largest for-profit college
in the U.S. by enrollment, awarded 25 full-tuition scholarships
worth $1.25 million in the fiscal year ended August 31 to the
Congressional Black Caucus Foundation, which selects the

recipients, Apollo spokeswoman Sara Jones said in an e-mail.
More minority students earn degrees from Phoenix than from any
other U.S. university, she said.
In March, several members of the Congressional Black Caucus
sent a letter to Duncan, saying the regulations would reduce
educational opportunity.
Regulators need more tools to oversee publicly-traded
education companies receiving increasing amounts of federal
money, Robert Shireman, deputy undersecretary of the education
department, said in a speech on April28.
"I don't think we have the firepower that we need," he
said, according to a transcript of his remarks.
The speech was "highly negative" and was "drawing
inappropriate and unwarranted parallels between developments in
higher education and the causes of the recent financial
crisis," Harris Miller, president of the Career College
Association wrote in an April 29letter to Duncan.
For Related News and Information:
Stories about education: NI EDU
U.S. colleges and universities: USUV
Education organizations: EDOR
Stories about the Department ofEducation:
NIEDN
--Editors: Robin D. Schatz,Jonathan Kaufman

To contact the reporters on this story:
John Hechinger in Boston at + 1-617-210-4614 or
jhechinger@bloomberg.net;
Daniel Golden in Boston at + 1-617-210-4610 or
dlgolden@bloom berg. net;
John Lauerman in Boston at + 1-617-210-4630 or
jlauerman@bl oomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at + 1-617-210-4638 or Jkaufman 17@bl oomberg.net.
From:
To:
CC:
Date:
Subject:
Finley Steve
Macias, Wendy
4/13/2010 10:18:08 AM
RE: Signal Hill -Post-Secondary Education: Relief Gainful Employment Gains Alternative Measure
INonresponsive
-----Original Message----From: Macias, Wendy
Sent: Tuesday, April13, 2010 9:51AM
To: Finley, Steve
Subject: FW: Signal Hill -Post-Secondary Education: Relief: Gainful Employment Gains Alternative Measure
Credible source. Great.
From: Bergeron, David

Sent: Tuesday, April13, 2010 9:49AM
To: Macias, Wendy
Subject: FW: Signal Hill -Post-Secondary Education: Relief: Gainful Employment Gains Alternative Measure
-----Original Message----From: Ritsch, Massie
Sent: Tuesday, April 13,2010 9:33AM
To: Shireman, Bob~ Madzelan, Dan~ Bergeron, David
Cc: Smith, Zakiya~ Arsenault, Leigh
Subject: Fw: Signal Hill -Post-Secondary Education: Relief: Gainful Employment Gains Alternative Measure
FYI
Massie Ritsch
U.S. Department ofEducation
----- Original Message ----From: Trace A. Urdan
To: Ritsch, Massie
Sent: Tue Apr 13 06:20:22 2010
Subject: Signal Hill -Post-Secondary Education: Relief: Gainful Employment Gains Alternative Measure
Business Services - Education Services

Industry Update
Aprill3, 2010 Relief Gainful Employment Gains Alternative Measure
Trace Urdan
415.364.0365
turdan@signalhill.com
Our Call:
As anticipated, Department ofEducation (USDOE) draft regulations went to the Office ofManagement & Budget
(OMB) last Friday 4/9 for review ptior to their publication in the Federal Register-- likely 5/15. A credible source close
to OMB tells us that while the 8% median debt/income measure, and the 90% student loan repayment measures appear
to be essentially unchanged from the terms presented by the USDOE in January, a third alternative measure has been
added.
This measure would allow programs with a graduation rate of 50% or better and a subsequent job placement (in the
relevant field) of70% or better to qualify out of the other two measures.
Though the devil will certainly be in the details, including how these items are to be considered for students that are
transfening credits and may be already employed, the new measure effectively removes the significant threat the rules
had created for nationally-accredited degree programs with typically high default rates. The new measure, in fact, seems
to closely resemble rules already imposed by national accrediting bodies. And while we might anticipate that the terms
could be stricter in USDOE's conception, they should be eminently achievable with minimal disruption for all programs.
According to USDOE analysis, (in process of being reviewed by OMB,) the rules themselves would only affect 6-8% of
all for-profit programs, with culinary, automotive tech, and nursing programs hardest hit. (yVe note that this seems out of
keeping with our knowledge of these programs as represented by publicly-traded schools, but nevertheless appears to
represent a conclusion reached by USDOE.) Our contact indicated that the University of Phoenix
(NASDAQ: APOL; Buy) was not seen as affected at all in the USDOE analysis.
While we expect all post-secondary school stocks to benefit from the news, we believe that the those names that had
been most challenged by the existing terms are likely to see the biggest benefit as a result of the change. These include
ITT Educational Services (NYSE: ESI; Buy), Corinthian Colleges
(NASDAQ: COCO; Buy), and Career Education (NASDAQ: CECO; Buy) which recently heralded graduation rates
comfortably above 50%. Though some individual programs may still fail all three tests, we believe these are likely to be
isolated, rare and fixable.
We view this apparent concession as evidence of a desire by Secretary Duncan to defuse what was promising to be an
area of real contention, as evidenced by House Republicans, members of the Congressional Black Caucus, and Senator
Lamar Alexander all calling out the Secretary on this issue. Secretary Duncan needs, in our opinion, a diverse coalition of
supporters to pass his signature
issue: K-12 education reform. Because the Secretary's K-12 proposals do not easily fall within typical party boundaries,
he really does need a bipartisan coalition in both the House and Senate education committees to pass his version of
ESEA (NCLB). No concession at all would have kicked off a loud and publicized summer of public commentary.
Because it is very difficult to argue that a 50% graduation rate and a 70% employment rate is an onerous burden, we
think USDOE has effectively neutered the campaign to ditch the rule entirely.
We still expect industry to challenge the rule in public and likely later in court, but based on our reliable source, we
believe investors need no longer fear that significant revenues could be at risk in the event that the rules are passed.
Please see end of this report for important disclosure(s)
Investment Analysis:
Important Disclosures
Analyst Certification
I, Trace Urdan, hereby certifY that all of the views expressed in this research report accurately reflect my personal views
about the subject securities or issuers. I also certify that no part of my compensation was, is or will be directly or
indirectly related to the specific recommendations or views expressed in this research report. Signal Hill does not
compensate its equity research analysts based on specific investment banking transactions.
Signal Hill Equity research analysts receive compensation based on several factors, including overaiJ profitability and
revenues ofthe firm, which include investment banking revenues.
Meaning ofRatings
Signal Hill uses a three-tiered rating system defined as follows:
BUY: We expect this stock to outperform its peers over the next 12 months:
HOLD: We expect this stock to perform in line with its peers over the next 12
months:
SELL: We expect this stock to underperform its peers over the next 12 months:
Distribution ofRatings!IB Services
Signal Hill
IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY(BUY) 77 61.6 72 93.5
HOLD(HOLD) 47 37.6 38 80.9
SELL(SELL) 1 0.8 1 100.0
Disclaimer
This report has been prepared using sources we deem to be reliable but we do not guarantee its accuracy and it does
not purport to be complete. This report is published solely for information purposes and is not intended to be used as the
primary basis for making investment decisions, which should reflect the investment objectives and financial situation ofthe
investor.
The opinions expressed herein are subject to change without notice. This report is not an offer or the solicitation of an
offer to buy or sell securities. Additional information is available upon request.
From:
To:
CC:
Date:
Subject:
ElaineNeely <eneely@kaplan edu>

Finley, Steve
1/28/2010 5:04:34 PM
Re: State Application for academic program approval
Is this what you need?

Elaine
From: Finley, Steve

To: Elaine Neely
Sent: Thu Jan 28 16:03:29 2010
Subject: RE: State Application for academic program approvaJ
Thank you.
From: Elaine Neely [mailto:eneely@kaplan.edu]

Sent: Thursday, January 28, 2010 3:55PM
To: Finley, Steve
Cc: Elaine Neely
Subject: State Application for academic program approval
Steve, the attached document illustrates the requirement that a school submit both clock hours and credit hours when
they submit an application for (or change) eligibility. AJthough the school submits information in both clock and credit
hours, the state approves the program to teach in credit hours.
Please let me know if you have any questions.
Elaine M . Neely
Senior Vice President-- Regulatory Affairs & Compliance
Kaplan Higher Education

770-776-5018 (Work)
404-216-8008 (Cell)
From:
To:
CC:
Date:
Subject:
Finley Steve
Elaine Neely
1/28/2010 5:08:14 PM
RE: State Application for academic program approval
At this point I am just acknowledging receipt. I need to read it when time permits this afternoon, and then talk with other
folks.

To: Finley, Steve
Subject: Re: State Application for academic program approval
Is this what you need?

Elaine
From: Finley, Steve

To: Elaine Neely
Sent: Thu Jan 28 16:03:29 2010
Subject: RE: State Application for academic program approval
Thank you.
From: ElaineNeely [mailto:eneely@kaplan.edu]

To: Finley, Steve
Cc: Elaine Neely
they submit an application for (or change) eligibility. Although the school submits information in both clock and crectit
Elaine M. Neely
Senior Vice President --Regulatory Affairs & Compliance
770-776-5018 (Work)
404-216-8008 (Cell)
From:
To:
CC:
Date:
Subject:
Finley Steve
Elaine Neely
1/28/2010 5:03:30 PM
RE: State Application for academic program approval
Thank you.

Sent: Thursday, January 28,2010 3:55PM
To: Finley, Steve
Cc: Elaine Neely
they submjt an application for (or change) eligibility. Although the school submits information in both clock and credit
Elaine M. Neely
Senior Vice President-- Regulatory Affairs & Compliance
770-776-5018 (Work)
404-216-8008 (Cell)
From:
To:
CC:
Date:
Subject:
Finley, Steve
Hurley Nancy
8117/2010 8:49:52 AM
some regulatory news
Hi Nancy--
This is the latest round of stories on the proposed gainful employment regulations from the ED news clips:
Post-Secondary Education
For-Profit Higher-Education Providers Resist Regulatory Action. The Washington Post (8/17, Anderson) reports, "The
Washington Post Co. and other for-profit providers of higher education pushed back Monday against a government
report last week that found many of their former students are not on track to repay their loans." According to the Post,
"Under the proposed" ED "regulations, colleges would be ineligible for aid if their repayment rate is lower than 35
percent and they fai I to meet other criteria." The Post adds that "James Kvaal, deputy undersecretary of education, said"
loan repayment data "were published for informational purposes, not enforcement."
Thirteen Education Management College Campuses Fail To Meet ED Loan Repayment Threshold. The Pittsburgh
Tribune-Review (8/17, Stouffer) reports, "Thirteen college campuses operated by Education Management Corp. have
student loan repayment rates below a proposed [ED] threshold of35 percent, new government figures show. ... The
payback rate is important to for-profit postsecondary schools, according to [ED], which wants to tighten standards to
make sure loans are being repaid. The newly proposed rules, known as the 'gainful employment' regulations, are
scheduled to go into effect in July."
For-Profit Education Stocks Fall Sharply. Bloomberg News (8/17, Staley, Hechinger) reports, "For-profit college
stocks fell after [ED] released data that said fewer than 36 percent of the colleges' students repaid federal loans,
compared with 54 percent at public universities. Corinthian Colleges Inc., based in Santa Ana, California, plunged 20
percent to $5.33 at 1:52 p.m. in Nasdaq Stock Market composite trading after the data showed one of its campuses
had a repayment rate ofless than 20 percent. Washington Post Co., which owns Kaplan Inc., tumbled 7.7 percent to
$317 in New York Stock Exchange composite trading. An index of 12 education stocks fell 6 percent." Wall Street
Journal (8/17, Korn) also covers this story.
From:
To:
CC:
Date:
Subject:
ElaineNeely <eneely@kaplan edu>

Finley, Steve
Elaine Neely
1/28/2010 4:55:18 PM
State Application for academic program approval
they submit an application for (or change) eli.gibility. A1though the school submits information in both clock and credit
Elaine M . Neely
Senior Vice President --Regulatory Affairs & Compliance
770-776-5018 (Work)
404-216-8008 (Cell)
Pfl
DIVISION OF PRIVATE OCCUPATIONAL SCHOOLS
State Use Only
Colorado Department of Higher Education

1560 Broadway, Suite 1600
Denver, CO 80202
CI<#/Date_
_ __
AMT $' - - -- --
Initials_ _
ACTION:
Approved_ _
Denied_ _
Date
PROGRAM APPROVAL FORM (Must be typed)
School Name Kaplan College

School Address 500 E. 84th Ave., Suite W-200
Thornton, CO 80229
(Street No. and Name)
(Oty, State and Zip Code)
Program Title Health Information Technology
New~ Revised
Proposed Date of Implementation April l 5, 2009 Person Submitting Application Todd Smith
Classroom~ and/or
Degree Program 18! or
Rev03.05.08
Distance Education: Correspondence 0

On-line 0
Certificate Program 0
Diploma Program 0
Program Cost $ 26,500
Program Length In days/wks/mos/yrs AND, if applicable,

No. of Distance Ed Lessons ( NOT HOURS) 60 weeks
STATE THE OCCUPAnONAL OBJECTIVE OF THE PROGRAM:
The objective of the Health Information Technology program is to prepare the student by providing the occupational
education, training and skills for
(select all that app!IJ
l8l an entry-level employment opportunity 0 advanced-level employment
opportunity and/or 0 continuing education credit required for renewal of a license 0 continuing education to enhance education in
the occupation of/or related occupational areas of
Check if applicable:
t8'J Upon successful completion the graduate will be eligible to sit for the Registered Health Information Technician
examination. However, the College cannot guarantee a student's eligibility to take or pass this exam.
Program Prerequisite: [Ust the minimum requlrement(s) to gain entry into the program, i.e. education credential, license, coursework, or specialized training .
or expertise that Is not an admission requirement for acceptance into the school. If no program prerequisite Is required, please Indicate "None on the form].
None
Hrs. of
Theory
Ust all courses in the Program;

Also complete a Course Approval Form for EACH course listed:
Column E: Ust Total No. ofLeROnsfor EACH course, If Program Is Distance Ed
CS 115 Academic Strategies

ANA202 Anatomy and Physiology
HS112 Medical Terminology
HS 115 Professionalism in Health Services
CM199 Written and Oral Communication
HS117 Diseases of the Human Body
HI134 Health Information Technology and Systems
MM 103 College Mathematics
HS140 Pharmacology
HI141 Basic Medical Coding
HS170 Spanish for Health Care Workers
HS 180 Management and Supervision in Health Services
Hl142 Advanced Medical Coding
HI181 Health Services Delivery and Legal Issues
HI211 Health Information Statistics and Biomedical Research
HI230 Reimbursement Procedures
HI291 Applied Health Information Technology
Colorado Dept. of Higher Education, Division of Private Occupational Schools
Hrs. of
Lab
Total
Contact
Hrs.
30
50
30
20
50
50
20
50
50
30
30
30
30
40
30
60
30
0
0
0
0
0
0
40
0
0
40
0
0
60
0
20
40
60
D*
30
50
30
20
50
50
60
50
50
70
30
30
90
40
50
100
90
(If applicable)
Semester/Quarter
Credit Hrs.
arv:J/0(
No. of Lessons
3
5
3
2
5
5
4
5
5
5
3
3
6
4
4
8
6
Pfl
SS 124 Psychology
HI240 Health Data Management
HI292 Health Information Teclmology Practicum
*Extemship hours
Colorado Dept of Higher Education, Division of Private Occupational Schools
50
20
30
0
40
90*
50
60
120
Rev03.05.08
5
4
Bashford, Terry
From:
Sent:
To:
Cc:
Subject:
Kvaal, James
Wednesday, September 15,2010 4:36PM
Duncan, Arne; Bergeron, David; Kanter, Martha ; Martin, Carmel; Miller, Tony; Ochoa,
Eduardo; Rose, Charlie; Weiss, Joanne; Yuan , Georgia ; Ferguson , Keith ; Arsenault, Leigh;
Brain , Allie; Schmidt, Greg ; Muenzer, Melanie; Sova, Alexandra ; Friedlander, Rob; Haro ,
Adrian ; Davy, Earl; Powell, James; Rappel, Robert; Tucci, Richard; White, Malachi; Wilson ,
Lennie; Finley, Steve; Smith , Zakiya
Duran, Maribel; Salk, Sam; Myers , Sam; Shelton, Betsy
RE: 8:00-9:00 September 16th Gainful Employment Prep
(b)(S)
-----Original Appointment----From: Duncan, Arne

Sent: Tuesday, September 14, 2010 12:17 PM
To: Duncan, Arne; Bergeron, David; Kanter, Martha; Kvaal, James; Martin, Carmel; Miller, Tony; Ochoa, Eduardo; Rose,
Charlie; Weiss, Joanne; Yuan, Georgia; Ferguson, Keith; Arsenault, Leigh; Broin, Allie; Schmidt, Greg; Muenzer, Melanie;
Sova, Alexandra; Friedlander, Rob; Haro, Adrian; Davy, Earl; Powell, James; Roppel/ Robert; Tucci/ Richard; White,
Malachi; Wilson/ Lennie; Finley/ Steve; Smith, Zakiya
Cc: Duran, Maribel; Salk, Sam; MyerS1 Sam; Shelton/ Betsy
Subject: 8:00-9:00 September 16th Gainful Employment Prep
When: Thursday, September 161 2010 8:00AM-9:00AM (GMT-05:00) Eastern Time (US & Canada).
Where: Secretary's Conference Room (OS Managed)
When: Thursday, September 16, 2010 8:00AM-9:00AM (GMT-05:00) Eastern Time (US & Canada).
Where: Secretary's Conference Room (OS Managed)
Note: The GMT offset above does not reflect daylight saving time adjustments.
Internal Staff Attending:

David Bergeron
Steve Finley
Martha Kanter
James Kvaal
Carmel Martin
Tony Miller
Eduardo Ochoa
Charlie Rose
Zakiya Smith
Joanne Weiss
Georgia Yuan
POC:
Briefing Materials- James Kvaal
Scheduling- Tia Borders 205.4595
Conference Room - Hannah
Update as of 9/15/10: The date and time of this meeting has been changed from today to tomorrow at 8:00am. Thank
you, Tia
Update as of 9/14/10 at 4:15pm: The time of this meeting has been changed from 5:00-6:00 pm to 5:15-6:15 pm.
Thank you, Tia
Update as of 9/14/10 at 1:01 pm: Zakiya and Steve were added. Thank you, Tia
(b)(5)
b
w
--.
co
::::>
V'l
~'
<l.:
cx:z
00
>-CX:V'l
<l.:>
z~
~~
ex:
0..
....J
<{
ex:
w
f-
(b)(5)
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
00
&:v;
<l.:>
zw
~a::
:::if2
w
cx:
0..
....J
<l.:
a::
w
f-
(b)(5)
b
w
--.
co
::::>
V'l
~'
<l.:
cx:z
0
>-Q
CX:V'l
<l.:>
zw
~a::
:::if2
w
a::
0..
....J
<{
ex:
w
f-
(b)(S)
b
w
--.
co
::::>
V'l
~'
<l.:
cx:z
00
>-CX:V'l
<l.:>
z~
~~
ex:
0..
....J
<{
ex:
w
f-
(bi(S)
LrJ
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
00
>-CX:V'l
<l.:>
z~
~~
ex:
0..
....J
<{
ex:
w
f-
(b)(S)
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
0
>-Q
CX:V'l
<t>
z~
~~
a::
0..
....J
<t
a::
w
f-
(b)(5)
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
00
>-CX:V'l
<l.:>
zw
-a::
~0
-lf.=w
a::
0..
-1
<{
ex:
w
f-
(b)(5)
00
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
0
>-Q
CX:V'l
<l.:>
zw
~a::
:::if2
w
ex:
0..
....J
<{
ex:
w
f-
(b)(S)
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
0
>-Q
CX:V'l
<l.:>
zw
~a::
:::if2
w
ex:
0..
....J
<{
ex:
w
f-
(b)(5)
(b)(5)
(b)(5)
(b)(S)
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
00
&:v;
<l.:>
zw
~a::
:::if2
w
ex:
0..
....J
<{
ex:
w
f-
_ _ _ _ _ _j
(b)(5)
b
w
--.
co
::::>
V'l
~'
<l.:
cx:z
00
>-CX:V'l
<l.:>
z~
~~
ex:
0..
....J
<{
ex:
w
f-
(b)(5)
(b)(S)
b
w
--.
co
::::>
V'l
.,:..'
u..
<l.:
cx:z
0
>-Q
CX:V'l
<l.:>
zw
~a::
:::if2
w
ex:
0..
....J
<{
ex:
w
f-
(b)(5)
00
..-I
(b)(S)
(b)(5)
(b)(5)
(b)(5)
C'l1
N
(b)(5)
LrJ
N
(b)(5)
1.0
N
(b)(5)
(b)(S)
00
(b)(5)
(b)(5)
0
N1
(b)(5)
- - - - - - - - - - - - - - - Nm
(b)(5)
(b)(5)
Bashford, Terry
From:
Sent:
To:
Subject :
Attachments:
Finley, Steve
Wednesday, June 30, 2010 12:09 PM
Macias, Wendy
devry brochure
DV placement rate.pdf
Attached
See what you think about the limiting language in the footnotes on the front of the flyer
DeVry University Graduate

Employment Statistics
..
--
' ...
Arizona, Nevada and Utah

Combined statistics for students who graduated from
October 2007, February 2008 and June 2008 classes 1
Graduates
eligible
for career
asslstance'
Graduates
who actively
pursued
employment
for up to 180
days and
lhosewho
were already
employed'
Graduates
employed in
education
related
positions
within 180
days of
graduation
Graduates
employed
outside
their field
of study
BMET
16
BA
41
-.::;.J:,.<to
Graduates who actively

pursued and obtained
employment and those
who were already
employed in education
related careers within
180 days of graduation
Accounting
Biomedical
Engineering
Technology
Business
Administration
CET
Computer
Information
Systems
CIS
Electronics
and Computer
Technology
ECT
Electronics
Engineering
Technology
EET
Health
Information
Network and
Communications
Management
Network
Systems
Administration
Technical
Management
Graduates
ACCT
Computer
Engineering
Technology
Game and
Simulation
Programming
Average reported
annual compensation'
OeVry Career Services
TM
DeVry's Career Services Department is

geared toward the needs of our students and
their prospective employers. We support our
students' career efforts with the following:
National Advertising
An aggressive advertising campaign
acquaints employers across the country
with the broad spectrum of DeVry
graduates' skills and knowledge.
Employment Seminars
An ongoing series of seminars allows
employers to meet with DeVry officials
and the Career Services Director to discuss
human resources requirements.
HIT
NSA
Effective Sup;Jort Services
Employer Database
OeVry's Career Services Department
maintains an employer database that
contains information on national and
local companies.
GSP
NCM
Career Services professionals across the .

DeVry system work diligently to llelp
graduates attain positions in their career
fields. Although DeVry cannot guarantee
employment, the sta ff is committed to
assisting students, graduates and alumni
in identifying employment opportunities
and following through with effective
strategies for obtaining their desired
career positions.
$41,730
33
31
25
Career Fairs
Career fairs held periodically at the campus
enable students to meet and talk with major
recruiters of DeVry graduates.
These and other services help support

one of the strongest career services
efforts in education.
95
' Statistics reflect all graduates ofArizona, Nevada and Utah locations os well as graduates ofother DeVry locations nationwide who were assigned to
the Ptloenix rompus for c.oreerservices support. All programs culminate in o bachelor's degree except Electronics and Computer Technology, Health
rn{ormotlon Technology, Networfc Systems Administrotion, and Web Graphic Design. which culminate in on ossodote degree.
1 Includes base salazy and any additlonal tOXD.ble compensation.
' EJ:/ude.s graduates continuing their eduC<Jiion, foreign graduates legally ineligible to work in the United States and those ineligible for career assistance
because of tJ<treme circumstances. Contact the CareerServices Deportment for details.
EJ::udes graduates who actively pursued employment for less than Z80 doys and did not become employed.
NOTES: Completion statistics ore available upon request Program ovoilobltity vorits by /oC<Jiion. Statistics {or graduates of the Web Graphic Design degree
program will be oval/able approximatelysix months after the first doss graduates. Information presented is based on graduate-provided data.
DeVry.edu
Arizona, Nevada and Utah

r
II";'
"??" . ~ ...
~:@~fu!lor's arid Assotiat~

[ q~ree. Programs
r ~nUng .
~:~~EnslneeringTechnoioly
~~
~ Blislness Administration
Accounting
f~~irie~~ Information Systems
~-~- Finanse
Health Services Management
i,_r:fo:spitaJfty Management
~-~~ Hu~m~~.Resource MCinage~ent
,.. !.: Q~erahons Management
1- i .PioJeCt.]'Aanagement
r "
~"
~~~~~:~~~~i:~n:nt
_:~S'!_lall Business Management
~agd Entrepreneursll!P
'
g '_f.-1'echnlcal Communication
. "
" ..
CO!aputer Engineering Technology
Co11_puter Information Systems
f Bl.lsiness/~~oageJ!Ient
' fC?mp~ter Forensics
, Database Management
t..~ ~terprise Computing
Healtl;llnformation Systems
Information Systems Security
~ SystemsAnalysis and Integration
Web Development and Administration
.t:. ~eb Game Programming
Game illld Slmuatlon Programming

r._fiulth Information Technology
~:~uiJmedla ~lgn and Development
(""
. ;~~ph)c and Multimedia Design
1
:.. Gra_p.hifS and Multimedia

.... , Ml!nagement
'
!"'~ W#' ~~sign and Development
..~ We.b Ga!lle Programming'
;:.,iref-ork'arid Communications
d .... Management
f ....,. .,..'.
'
'
-~~SystemsA~mlnlstratlon :
' T~.rikal Management
' ' Criminal Jus~lce
' j;.He,atth Information M~nagement
Since 1975, DeVry University has graduated 235,465 undergraduate

students. Of graduates in the active job market, 90.3% were employed
in career-related positions within six months of graduation.
Thousands of DeVry graduates begin thei r careers with top companies

such as these:
..
'
DeVry Grads are in Demand
'
Abbott
Eltek Valere
Philips
ADL Technologies
Enterprise Rent-ACar
Automatic Data Processing (ADP)
Qwest Communications
International tnc.
Aerotek
Gaming Laboratories
International, LLC
Allstate
GE Healthcare
Robert Half International

Rockwell Collins
American Express
General Electric
Saber Corp.
Applied Materials
Hewitt Associates
Schlumberger
Astro-Physics, Inc.
Hewlett-Packard
Siemens
AT&T
Home Depot
Spherion
Bank of America
HSBC
Sprint Nextel
Baxter Healthcare
Huntington National Bank
State Fann Insurance
Best Buy
IBM
State Street Corporation
Boeing
Intel
Target Corporation
CAE SimuAite
Internal Revenue Service
TCfBank
Cardinal Health
Johnson & Johnson
TEKsystems
cow
Johnson Controls
UPS
Cemer
JPMorgan Chase & Co.
US Department of Defense
Cisco Systems, Inc.
Kaiser Pennanente
Citigroup
Kelly Services
US Department
of Veterans Affairs
Comcast
Lockheed Martin
US Navy
CommVault
McKesson
Varian Medical Systems
CompuSystems Inc. (CSI)
Motorola
Verizon Wireless
Convergys
Nationwide
Vonage
Cox Communications
Northrop Grumman
Walgreens
Daktronics
Perot Systems
Wai-Mart
~'~' web~Graphlc Design
:J'rogram twailobilityfiOrles by locorion.
r . ,_.
~ ..~. '.
... ----~-~...__,
DeVry.edu
Bashford, Terry
From:
Sent:
To:
Subject:
Attachments:
Palumbo, Gayle
Friday, May 28, 2010 5:50PM
Fernandez-Rosario, Martina; Toney, Dyon; Dickerson, Patricia; Shepard , Nan; Wolff, Russell;
Woodward, Jennifer
FW: For Profit Education Industry
EismanSohnConference.doc; ED Presentation_SOHN.ppt
From: Mary Houston ':[m~a~i~lto"':::it<.bl-r

.,. . ( ...,'~--JI.,..@:.J.y=ah:..:.;oo=.c=o=m::..:....l
Sent: Friday, May 28, 2010 2:44 PM

To: sally.stroup@ed.gov
Cc: Tondra.Ciaiborne@phoenix.edu;
Henderson, Linda; Hillard, Dale; Wittman, Donna; Palumbo, Gayle
Subject: Fw: For Profit Education Industry
Dear Ms. Stroup,

I just read the IRA SOHN CONFERENCE Presentation by Steve Eisman. It names you as the prime example
as to how, as the head lobbyist for the Apollo Group, and then becoming the Assistant Secretary of PostSecondary Education for the DOE under President Bush, the For-Profit Education Industry is just as socially
destructive and morally bankrupt as the subprime mortgate industry.
Since becoming a victim of the University ofPhoenix's corruptness in the tactics of Title IV financial aid
handling, I have dedicated myself to see to it that UoP/Apoll o and people like yourself are brought down to
the level of people like myself, who are scraping for crumbs, and practi call y begging for mercy from our debts.
Debts that greed and corruption from people such as yourself have piled on top of mainstream America.
Shame on all of you responsible for the state of affairs in our country. I continue to hope and pray that God will
repay all of you according to your deeds.
Sincerely,
Mary Houston
----- Forwarded Message ---From: Robert MacArthur <rmacarthur@altresearch.com>
To: Robert MacArthur <rmacarthur@altresearch.com>
Sent: Wed, May 26, 2010 3:10:01 PM
Subject: For Profit Education Industry
rl
0
N
Disclosures
The information and opinions in this document are prepared by FrontPoint Partners LLC ("FrontPoint"). This information does not
have regard to the specific investment objectives, financial situation and the particular needs of any individual who may receive
this information. Any strategy discussed in this report may not be suitable for all persons, and recipients must make their own
investment decisions using their own independent advisors as they believe necessary and based on their specific financial
situation and investment objectives. This information contains statements of fact relating to economic and market conditions
generally. Although these statements of fact have been obtained from and are based on sources that the author believes to be
reliable, we do not guarantee their accuracy and any such information might be incomplete or condensed. There is no guarantee
that the views and opinions expressed will prove to be accurate. Opinions, estimates and projections in this information constitute
the judgment of the author as of the date of this document and are subject to change without notice. FrontPoint has no obligation
to update, modify or amend this information or otherwise notify a recipient thereof in the event that any matter stated herein, or any
opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Any trading strategies or
investment ideas or positions discussed in this presentation may or may not be applied by FrontPoint or any of affiliates for their
investment funds or accounts. Any estimates of future returns are not intended to predict performance of any investment. Income
from investments may fluctuate. Past performance is not a guarantee of future results.
Information regarding expected market returns and market outlooks is based on the research, analysis, and opinions of the author
as of the date of this information. These conclusions are speculative in nature, are subject to change, may not come to pass, and
are not intended to predict the future of any specific investment.
Alternative investments are speculative, involve a high degree of risk, are highly illiquid, typically have higher fees than
other investments, and may engage in the use of leverage, short sales, and derivatives, which may increase the risk of
investment loss.
FrontPoint does not offer or provide tax or legal advice and the topics discussed should not be taken as tax or legal advice. The
recipient should not construe the contents of this Presentation as legal, tax, or financial advice and should consult its own
professional advisors as to the legal, tax, financial, or other matters relevant to the suitability of an investment for the recipient
before entering into transactions in which the tax or legal consequences may be a significant factor.
The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any limited partnership interests or to participate in any trading strategy. If any offer of limited
partnership interests is made, it shall be pursuant to a definitive Offering Memorandum prepared by or on behalf of the Fund which
would contain material information not contained herein and which shall supersede this information in its entirety.
QJ
,........
~
ta
on
QJ
.....-4
.....-4
0
,........
,........
~
~
CI':J
QJ
on
QJ
~
~
8
~
~
,.Q
en
In the last 10 years/ the for-profit education industry has grown at 5-10 times the
historical rate of traditional post-secondary education
Annual enrollment growth of Total U.S. postsecondary institutions vs. For profit institutions
I 0 Total industry enrollment growth
II For-profit enrollment growth
25% ~----------------------------------------------------------------------------------~
20%
15%
10%
5%
0%
1998
1999
2000
2001
2002
2003
Source : National Center for Education Statistics. 2009
2004
2005
2006
2007
2008
Which has drastically accelerated the for-profit's share of total US post-secondary

enrollments and led to the rapid growth of for-profit institutions
In 1990...
< 1% of all students attended
< 10% of all schools
for-profit colleges ...
were for-profit. ..
For profit students as a % of total U.S. postsecondary students
9%
For profit institutions as a % of total U.S. postsecondary institutions
~---==~~==~~~~~~
30%
8%
25%
7%
6%
20%
5%
15%
4%
3%
10'/,
::J n.D.D.D.D.D.n.ii .ii.ii.ll.ll.ll.ll .ii .il.ii.II.II.IIJ

*
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
S% J
I !
I I
I f
I 1 I
I i
I I
I I
I I
I I
I I
~~~~~~~~~*~~~&~~~~~~
~ ~~ ~~ ~~ ~~ ~~ f~ ~~ ~~ ~~
In 2009 ...
almost 10% of students
attend for-profit colleges
25% of schools are

for-profit institutions
Source: National Center for Education Statistics. 2009
'l
Despite being less than lOo/o of total enrollments, for-profits now claim nearly
25% of the $89 billion of Federal Title IV student loans and grant disbursements
For-profit share of Title IV disbursements (Pell grants and Federal stafford loans), 1998-2009
27o/o ~---------------------------------------------------------------------------------------------------------------------------------------------------------~
26%
25%
24%
In 2009, For-Profit schools collected $4.4 billion of the $18.2 billion

in Federal Pell Grants, or about 24% of all Pell Grant funding double the proportion from ten years ago.
23%
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
7%
1998
1999
2000
0 Pell grants
Source : College Board. NCLC
2001
2002
2003
2004
mSubsidized stafford loans

7
2005
2006
0 Unsubsidized stafford loans
2007
2008
2009
How is this possible?! The for-profit industry has bought almost every lobbyist
and has infiltrated the highest levels of government ... a prime example
Sally Stroup was a pivotal player in the deregulation of the for-profit industry ...
because she worked for the for-profit industry
Sally Stroup Biography:
2001 - 2002: Director of Industry and Government Affairs for the Apollo Group
(top lobbyist for APOL)
2002-2006: Assistant Secretary for Postsecondary Education, U.S. Dept of

Education (top postsecondary education position)
2006-2008: GOP Deputy Staff Director, U.S. House of Representatives

Committee on Education and Labor (largest recipient of political contributions from
for-profit education industry)
2008- Present: GOP Staff Director, U.S. House of Representatives Committee on

Education and Labor
...and not surprisingly, her colleagues at the Dept of Education were all driven by similar goals
Name
Former DOE position
Current Lobbying Firm
For-profit Education client
William Hansen
Deputy Secretary of Eductaion, 2001 - 2003
Chartwell Education Group
APOLLO GROUP
Jonathan Vogel
Deputy Counsel to the Department of ED, 2002 - 2005
Sonnenschein, Nath & Rosentha l
GRAND CANYON UNIVERSITY
Lauren Maddox
DOE Asst Sec for Communications, 2006 - 2008
Podesta Group
CAREER EDUCATION CORP
Rebecca Campoverde
DOE Asst Sec for Congressional & Legislative affairs, 2005 - 2008
Kaplan, Inc.
KAPLAN, INC
Victor F. Klatt Ill
GOP Staff Director for House ED and Labor, 2005- 2008
Van Scoyoc Associates
APOLLO GROUP
From 1987 through 2000, the amount of total Title IV dollars given to for-profit
schools fluctuated between $2 billion and $4 billion dollars ...
Total Federal disbursements of Title IV Stafford Loans and Pell Grants, 1987 - 2009
Dollars in billions
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2006
2006
2007
2008
2009
Total
Total
Pell Grants
Stafford Loans
$3.5
$7.3
$8.0
$3.8
$4.5
$8.2
$4.8
$8.3
$4.9
$8.8
$5.8
$9.5
$6.2
$9.9
$5.7
$14.1
$5.5
$19.9
$5.5
$22.8
$5.8
$25.1
$6.3
$26.3
$7.2
$27.2
$7.2
$28.4
''''
''''''''
$8.0
$29.6
$10.0
$32.1
$11.6
$36.6
$12.7
$41.6
$13.1
$46.7
$12.7
$48.0
$12.8
$49.4
$14.7
$66.8
$18.2
$70.9
Pel/ Grants
quadrupled from $1
billion to $4 billion
For profit
Pell Grants
$0.9
$1.0
$1.1
$1.1
$1.1
$1.2
$1.1
$0.9
$0.7
$0.7
$0.7
$0.8
For profit
Stafford Loans
$1.8
$2.1
$2.3
$1.9
$1 .5
$1 .3
$1 .0
$1.4
$2.0
$1 .9
$2.2
$2.3
$2.6
$3.0
$3.4
$4.1
$6.2
$6.6
$7.9
$8.8
$9.6
$12.4
$17.0
Total
For ~rofit
$2.7
$3.1
$34
$3.0
$2.6
$2.5
$2.1
$2.3
$2.7
$2.6
$2.9
$3.0
$3.5
For profit share

For profit share
Pell Grants
Stafford Loans
25%
25%
27%
27%
24%
28%
23%
23%
22%
17%
21%
14%
18%
10%
15%
10%
13%
10%
13%
8%
12%
9%
12%
9%
13%
10%
13%
10%
''''''''
14%
12%
13%
14%
16%
14%
16%
16%
18%
17%
19%
18%
19%
19%
.21%
22%
24%
24%
Total Title IV aid grew from

under $4 billion in 2000 to over
$21 billion in 2009
... but with the leniency shown to the industry under the Bush Administration, the
dollars that flowed to the industry exploded to over $21 billion, a 450% increase
Source : College Board
At the current pace of growth, For-profit schools will claim 20o/o of emollments,
represent 40/o of schools and draw over 40% of all Title IV aid in 10 years
For-profit share of enrollment, schools, Pell grants and Loans, 2009- 2020
Year
2007
2008
2009
20 10
20 11
2012
2013
20 14
20 15
2016
2017
20 18
20 19
2020
Total
Enrollment
7%
8%
8%
9%
10%
10%
11%
12%
13%
14%
16%
17%
18%
20%
c:
For-12rofits % share of:

Total
Pelt
Stafford
Schools
Grants
Loans
23%
19%
19%
22%
24%
21%
24%
25%
24%
25%
26%
25%
27%
27%
26%
28%
29%
27%
30%
28%
30%
31%
30%
31%
33%
32%
31%
35%
34%
32%
36%
35%
33%
38%
37%
35%
:ifWr.
39%
40%
..
40%
38%
43%
Total post-secondary enrollment grows at 1.5% per year

For-profit enrollment grows at 10% per year (10-yr avg is 14.4%
--- -11 . .\
Total post-secondary institutions grow at 1.5% per year; For-profit

institutions grow at 6% per yea r (both long-term avg since 1990)
=::::>
... nearly $50 billion (annuall'iJ. will go

toward non-faculty and executive
compensation and company profits
Avg grant and loan amounts per student grows at 5-yr historical avg
growth rates, by institution type
Source : College Board. US Dept of Education, industry estimates
Total Title IV disbursements{~ billions}

Non-12rofits
For-12rofits
$50.2
$12.0
$56.0
$15.5
$67.6
$21.4
$24.3
$7 1.9
$27.7
$76.5
$81 .2
$31 .5
$86.2
$35.8
$91.4
$40.8
$96.9
$46.4
$102.5
$52.8
$108.4
$60.1
$68.5
$114.4
$77.9
$120.6
$88.8 .......
$126.9
Based on current financials of For-profit

institutions, less than 30% of the
incremental $67 billion (annuall'iJ. in
Title IV dollars will go towards
educating students ...
Key Assumptions for Projections
.
.
Total
Title IV
19%
22%
24%
25%
27%
28%
29%
31%
32%
34%
36%
38%
40%
42%
10
At many major for-profit institutions, federal Title IV loan and grant dollars now
comprise close to 90o/o of total revenues
2001
2009
Other,
11 %
Apollo Group
Other,
Title IV,
48%
52%
Title IV,
89%
ITT Technical
Institute
65%
85%
Note: Title IV figures include 2008 unsubsidized Joan limit increases on a pro-forma basis
Source: Company-reported financials
11
This growth has driven even more spectacular company profitability and wealth
creation for industry executives and shareholders
ITT Technical Institute (ESI) Profitability has grown 5-fold since 2006
ESI operating margin % , Q1 06 - Q409
ESI operating profit($ millions), Q106- Q409

$165
$155
$145
$135
$125
$115
$105
45% -- - - 40%
35%
30%
$95
$85
$75
$65
$55
$45
$35
$25
25%
20%
15% ~----~~----~~----~~----~~-.--.-,-~
~ro t:::>ro s:."' t:::>"' ~"' t:::>"' t: :><o t:::><o t:::><o ~<o ~"' t;:,"> t;:,"> t;:,">
...,o:t:::>ro "'u~ro
-- ..,u-.,.o: ...,o: "'0: ..,u-- .,.o: ...,o: "'0: ..,o: .,.u-- ...,uc "'0: ..,o: .,.o:
n
t:::>ro
...,o:
n~
"'0t:::>ro: ..,o:t:::>ro ~t:::>ro ...,o:t:::>"' "'0t:::>"': ..,o:t:::>"' ~t:::>"' ...,o:r;:,'O "'0t;:,'O: ..,o:t;:,'O .,.o:f: :><o ...,o:t;:,"> "'0t;:,: "> ..,o:t;:,"> .,.o:t;:,">
The top 5 executives at ESI, Corinthian colleges (COCO) and Apollo Group (APOL)
collectively earned over $130 million from 2007-2009
To12 5 executives total com12ensation
coco
ESI
APOL
2007
2008
2009
$9,834,695
$8,923,79 1
$14,366,540
$4,938,982
$8,849,386
$1 1,222,377
$ 10,441,170
$26,766,979
$34,707,377
3-yr total comp
$33,125,026
$25,010,745
$71,915,526
Total comp =salary, bonus. stock awards. option awards, non-equity incentives
Source: Company-reported financials and proxy statements
12
Total
$25,2 14,847
$44,540,156
$60,296,294
Now many of the US for-profit education companies are among the most profitable
businesses in the world
Other industries of strategic importance to the U.S.
which are funded by taxpayer dollars are restricted
to lower operating margins on contracts ...
2009 Company Operating Margins
5-year Average Company Operating Margins, 2005-2009
35o/o ~------~--------------------------------------------------------~
45% ~--------------------------------------------------~
40%
37.4%
30%
29.0%
35%
25%
30%
19.8%
25%
20%
20%
15%
15%
12.1%
9.9%
10%
9.8%
10%
18.4%
9.5%
9.1%
Lockheed
Martin
Home Depot
7.4%
5%
5%
0%
0%
ITT Technical
Institute
Lockheed
Martin
Raytheon Corp
Northrup
Grumman
Boeing
ITT Technical
Institute
Apple
Computer
Procter &
Gamble
So how can Title IV-funded education companies

earn substantially more money than nearly evel}l
other major US business?
13
This growth however, is p rimarily a function of government largesse, as Title IV

has accounted for more than 100% of the revenue growth of these companies
A(!ollo Groue (APOL)
Total revenues
Year-year growth
% revenue from TiUe IV*
Title IV revenues
Year-year growth
2007
2008
$2,724
$3,141
$417
77%
65%
$1,770
% revenue growth from TIUe IV
2009
$3,974
$833
89%
$2,419
$648
$3 537
( $1,119
155%
134%
Corinthian Colleges (COCO}
2007
2008
2009
Total revenues
Year-year growth
% revenue from TIUe IV*
$919
$1 ,069
$149
81 %
$1 ,308
$239
89%
$866
$174
$1,163
$297
117%
124%
Title IV revenues
Year-year g rowth
75%
$691
% revenue growth from TiUe IV
ITT Technical Institute (ESI}
2007
2008
2009
Total revenues
Year-year growth
$758
$870
$112
73%
$1,015
$146
85%
$635
$157
$863
$228
141%
157%
Title IV revenues
Year-year growth
63%
$477
% revenue growth from Title IV

Dollars in millions
*Title IV% includes 2008 Stafford unsubsidized loan limit increases
Source : Company-reported financials
14
v~
More than 100/o of the

revenue growth of APOL,
COCO and ESI is driven by
an increase in Federal Title
IV dollars ...
.. .and of this incremental

$1.1 billion in Title IV and
$833 million in revenues,
ONLY $99 million or 9/o
was spent on educational
expenses like faculty
compensation and other
instructional costs
But how do they do it? How are for-profit schools grabbing such a growing share of
Title IV dollars?
Traditional relationship- Matching Means with Costs
Families with greater needs generally seek lower-cost
institutions to maximize the available Title IV loans and
grants, getting the most out of every dollar to reduce outof-pocket expenses and minimize heavy debt burdens ...
Families with greater financial resources often seek highercost institutions because they can afford to pay in excess of
what Title IV loans cover. These families typically are not
eligible for grants because of their higher-income status.
Lesser Means
Greater Means
(Low-Mid Income Families)
(High Income Families)
-D-
-D-
Low Cost Institutions
High Cost Institutions
(Community College or In-State School)
(Private Colleges)
For-profit Model - Max Cost with Minimal Means

The for-profit model has consciously separated the
traditional relationship between costs and means. They
seek to recruit those with the greatest financial needs and
put them in the llighest-cost institutions ...and why?
Lesser Means
-D[
This formula maximizes the amount of Title IV loans and

grants their students can receive.
15
..
Q)
"'d
0
What results from this combination of p rofit-motive and lack of quality control is
an expensive education that is highly questionable
News Article summary
east Saf N"wa ~
Everest College students angry over certification
Students paid $16,000 for an eight-month

course in medical assisting at an Everest
College campus in Hayward, CA
Students recently learned that:
Credits earned at the school do not
transfer to any community or four-year
college
Degrees granted at the school are not
recognized by the American
Association for Medical Assistants
(AAMA)
~ ll t
!!fl
... ..
Hospitals will not interview students

for potential jobs
By Tomas Roman
HAYWARD. CA (KGO}- Nearly three dozen Everest College students t~re

furious they haven1 received I he medocal certifications they paid for They refused
to go to class until they gel some tmswers
ABC7 talked to the state Medical

Assistant's Education Review Board
and found the Hayward Campus is one
of several Everest operates in California
that the board say is not accredited to
credential medical assistants.
Whether they attend class or not the students hiM! to pay S100.
Some of the students have been <~Itending school lor eight months. Three weeks
ago they found out tha1 the college does not supply1hem with a certificate they
were told they would get, in order to obtain the medical posit tons they want
The students are all s1udymg medical assisting <>nd they paid S16.000 for an
eight-month course They were told the credils earned at the school do not
transfer to any community or four-year college and that has many of them angry.
Source : ABC News, KGO- TV San Francisco, CA, March 19. 2010
17
Even when assuming reported graduation rates (BIG ASSUMPTION), more than
50o/o of the student body still drops out every year
APOL
Beginning enrollment
+ New students
- Graduates I drop outs
2006
278,300
216,600
(212,600)
Ending enrollment
282,300
Graduation rate
Graduates
Drop outs
Drops % of avg total enrollment
28%
61,390
151,210
54%
2007
282,300
258,500
(227, 100~
2008
313,700
288,200
(239,800)
2009
362,100
355,800
(274,900)
313,700
362,100
443,000
28%
72,338
154,762
52%
28%
78,484
161 ,316
48%
28%
83,440
191 ,460
48%
Assuming these graduation rates,

every year 50%+ of APOL and ESI
students drop-out annually.
COCO recycles its entire
"Assume avg tenure btwn 3-4 years for graduates
ESI
+ New students
2006
42,985
49,935
(46,024)
2007
46,896
54,593
(48,462)
2008
53,027
65,313
(56,357)
2009
61,983
85,928
(67,145)
Ending enrollment
46,896
53,027
61 ,983
80,766
Graduation rate
Graduates
Drop outs
44%
18,449
27,575
61%
44%
19,774
28,688
57%
44%
21 ,983
34,374
60%
44%
25,302
41 ,843
59%
........._
Graduation rate estimate based on reported

National Cente r of Education Statisti cs data;
figures represe nt average inst itutiona l graduation
rates at top 5 largest institution s
coco
enrollment annually.
For reference, 2009 Dept of ED reported

graduation rates for ful l-time, first time students at
for-profit schoo ls is between 14-22%; t hese
graduation rates have been adjusted to include non
first-time, fu ll-time students, still may be largely
overstated
+ New students
2006
66,114
92,185
(97,335)
2007
60,964
90,105
(89,737)
2008
61 ,332
100,210
(92,331)
2009
69,211
11 7,352
(100,475)
Ending enrollment
60,964
61,332
69,211
86,088
Graduation rate
Graduates
Drop outs
33%
20,968
76,367
120%
33%
20,179
69,558
114%
33%
21 ,540
70,791
108%
33%
25,624
74,851
96%
1 Former academic counselors of APOL, ESI and

COCO claim that real graduation rates at many
locations are in the single digits
I
Source: Company-reported financials, !PEDS data (College Navigator), APOL student ou1&mes report 2009
Default rates- historical National Cohort Default rates by institution type

Outside of the mid-90's, when the regulatory environment was more stringent,
default rates at For-profit schools are roughly 2x non-profit default rates
Exhibit 2. National Cohort Default Ra1es by Institution Type {FY1991 ..

FY2008)
JC<t ~
m
2f~
1t~ 1~~
0 1931 D ii95
46_.!~:;
c 1Y,.J t995 Ji11 1S.'!l&
0 1~7 [] 19: - ~~ 20~ El:!>Jt . ::m:J

o ~ c ~l.t o ztOS o 2l:ie o trm o 2Coa
1 ~;
1t'!'i
!'"i.
c-e
;\1~
Pl.f)t~ ~!~~:
P1tli':t! M<~t<-J!Iro1!:
Pn>!3:e FGfDrl:m
Not4 ~:'li datl ls dr.f.t Sou:~: SMO Capitd Marit~Ks 3.1'1C~ U3 Department of Eduo.3tlon Nat!on~t ~:er -b
Ec..Jeabon Stalis11C:s.
Source : NCES industry data and chart taken from recent BMO capital markets research report
19
We are back to late-80's levels of lending to for-profit students, a key leading indicator
for loan defaults ... back then, fraud was commonplace and regulation was minimal
Traditional vs.
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
For-~rofit
Total
Enrollment
1%
2%
2%
2%
2%
2%
2%
2%
2%
2%
2%
3%
3%
3%
3%
4%
4%
5%
6%
6%
7%
8%
8%
disbursements of Title IV Stafford Loans and Pell Grants1 1987 - 2009
For-erofits % share of:

Stafford
Total
Pell
Schools
Grants
Loans
10%
26%
26%
10%
27%
27%
24%
28%
10%
10%
23%
23%
10%
22%
17%
9%
21%
14%
9%
18%
10%
10%
9%
15%
9%
13%
10%
9%
13%
8%
15%
12%
9%
16%
12%
9%
10%
17%
13%
18%
13%
10%
19%
14%
12%
19%
14%
13%
19%
15%
14%
20%
16%
16%
17%
21%
18%
22%
19%
18%
23%
19%
19%
24%
21%
22%
26%
24%
24%
Total
Title IV
~
27%
27%
23%
19%
16%
13%
12%
11%
9%
9%
9%
10%
11%
12%
13%
14%
16%
17%
18%
19%
22%
Average Pell Grant+ Loans

Per Student
All schools
Non-erofit
$842
$643
$899
$670
$933
$697
$948
$740
$954
$788
$895
$1,053
$989
$1 ,120
$1,385
$1 ,246
$1,780
$1 ,616
$11,339
$1 ,827
$8,402
$1 ,967
$1 ,974
$8,910
$2,131
$2,249
$2,093
$8,317
$2,329
$2,154
$8,152
$2,323
$2,130
$8,681
$2,351
$2,139
$8,533
$2,531
$2,278
$9,349
$2,848
$2,543
$9,786
$3,146
$2,783
$9,909
$3,364
$2,947
$10,153
$3,420
$2,968
$10,498
$3,407
$2,944
$10,074
$3,740
$3,173
$10,541
$4,626
$3,744 C $13,247
We must take note that because For-profit students recei ve 3-5x as much Title IV aid as traditional
students and are growing enrollment at 3x the pace of traditional schools, these early warning
signs must be addressed now before the impact is felt in the coming years ...
20
If history is any guide, we will return to late-80's Cohort Default rates in 1-2 years,
the worst period of recorded default rates in the history of the DOE
Average Total Loans+ Grants per For-profit student vs. DOE Official CDRs, 1987- 2009
c:::::J Avg Loans + Grants
------- Official CDR
$16,000
24%
$15,000
$14,000
r;
,;~
20%
r
r
Ill
1: $13,000
16%
Q.l
"0
0::
:I
~
~ $12,000
{)
iii
a.
12%
Q.l
.. $11,000
UJ
j::
iii
.... $10,000
l1
r-
8%
I'""
,....,
$9,000
4%
I'""
I'""
$8,000
$7,000
I I I
I 1 I
I I I
I 1 I
I I I
I 1 I
I I I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~
Source : College Board. US Dept of Education
:
:t:
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
~
21
I Oo/o
Because of the excessive drop-ou t rates an d high debt bu rdens of graduates, the credit
statistics for government loans at for-profits are deteriorating at an alarming pace
Corinthian Colleges Cohort Default Rates, 2004 - 2008
42o/o ~-----------------------------------------------------------------------------------------------------,
40%
40%
I -+- 2-yr rates
- - - 3-yr rates ]
38%
36%
34%
32%
30%
28%
26%
24%
22%
21 %
20%
18%
16%
14%
12%
11 %
11 %
10o/o +---------------------.--------------------,---------------------.---------------------.--------------------~
2004
2005
2006
Source: Company-reported financials; note: 2008 2-yr rates still preliminary, 3-yr rates estimated
22
2007
2008
Currently/ for-profit institutions provision 50 - 60% on loans they make to their

own stu dents ...these are students who already have Title IV loans
Companies are provisioning for more than 50/o+ loss on loans they make to students ...
which means they expect more than 1 out of every 2 loans to go bad
But absent any regulatory threat, these companies could care less if they every loan they
made went bad because the per-student profitability of their models is so high!
Both companies would still be hugely profitable on a per-student basis even with a 100%
losses on every loan they made
Title IV loans, grants and private loans

Internal company loan per student
Tuition per student (2009)
Provision for loan losses(%)
Expected losses on internal loans
Operating profit per student
Multiple of expected losses
ESI
coco
$16,959
$2,100
$14,443
$1 ,770
$19,059
$16,213
60%
($1 ,060)
68%
($1 ,027)
$8,792
CS.4x
$4,282
4.2X
Note: OP I student equals change in operating profit over change in total enrollment
Loan loss provisions provided by companies
23
ESI earns more than 8 times the

amount it expects to lose from
internal loans to students.
J
COCO earns more than 4 times

its expected loan losses.
Reported statistics ... Cohort Default Rates (CDRs)

Cohort Default Rates (CDRs)
CDRs are the percentage of a school's borrowers who enter repayment on a Federal Loan during a particular
federal FY (Oct 1 to Sep 30), and default prior to the end of the next FY
Effectively a 2-yr snapshot of the total students in default
CDRs are an important measure of quality- if default rates breach the federally-mandated threshold of 25%
(soon to be 30%), schools can lose eligibility to Title IV
Can easi ly be manipulated to mask true defaults
Deferrals and forbearances used en mass to carry students over the 2 year reported timeframe
Schools partner with Sallie Mae and other lenders to delay or manage down defaults through the 2 year
timeframe in exchange for guaranteed loan volumes
Schools pay down student government loans with internal money and collect directly from students
24
Reported statistics ... the 90/10 rule

The 90/1 0 rule
90/10 says a for-profit may become ineligible to participate in Title IV programs if it derives more than 90% of its
cash basis revenue from Title IV programs
Applies only to for-profit institutions, effectively a cap on total Title IV dollars that can flow to a company as a
percentage of revenues
Intended to create a structural boundary for growth from Title IV dollars
Can also be manipulated
Over-returning Title IV dollars to the government when students drop out and then billing students directly
Pursue alternative government entitlement programs not counted under the Title IV umbrella (military educational
loans grants)
When all else fails , raise tuition! Students will have to find alternative (non-Title IV) funding sources to close the
gap between tuition and the amount of total Title IV loans
25
Reported statistics ... completions and placements

Completions (graduation stats)
Company-reported metric that measures the number of students who complete a program (graduate) in 150% of
normal time (for example, 6 years of graduation data for a 4-year bachelors program)
Non-traditional student body doesn't graduate together, and often takes much longer than normal to complete, so
hard to understand actual graduation by class
No independent verification of graduates
Placements (employment stats)
Company-reported metric that measures the number of students who are placed in a job they were trained for
(gainful employment)
This is gainful employment?
Trained nurses become janitors at hospitals
Homeland security degree grads become nighttime security guards at shopping malls
And for those grads who cannot find employment. hire them! Most schools hire unemployed graduates
internally to boost reported placement stats
0
26
As long as the government continues to flood the for-profit education

industry with loan dollars,
AND
the risk for these loans is borne SOLELY BY students and the government .. .
THEN
the industry has every incentive to:
-Grow at all costs
- Compensate employees based on enrollment
-Influence key regulatory bodies
- Manipulate reported statistics and other regulatory measures
ALL TO MAINTAIN ACCESS TO THE GOVERNMENT'S MONEY.
"Its about the numbers. It will always be about the numbers."

- Bill Brebaugh, head of University of Phoenix Corporate Emollment
The entire business model of these companies is centered around growing enrollment it is the single most important measure of growth and profitability, period.
Boiler room tactics:
Actual APOL compensation table snapshot
"Every 6 months we get a review that looks at how

many students we enrolled and what percentage of
them finished their first class. As long as they finish
their first class we get full credit and after that they are
not our problem ... "
Utrolll\ttllb.
-e
~UonofWall
Otol!>c"'~l)
ltl to 4-4 tl6trfltolt

.fSe."""'lm<nls
4 S~nw>lo
1~0SJil'llf~
"We are under so much pressure we are forced to do

anything necessary to get people to fill out an
application ..."
4& Clll<lfln!Mit
4$41111llso~
It's a boiler room - selling education to people who

don't really want if."
Ashford University (BPI) former enrollment

counselor
,,01<
$7:01\611$m
S2i9\
$29\
SUk
""~
~'
~n:
)1!(
~
31:
iSZCIIIot-
l~k
S24k
$25"~
$.u t,
ua
Wl
&itfltll~
61tnr~
f38lt
SJ!llt
Qeooc~
I:J1lc
'*
8~
sm:
60 II!'Cih::r.b
oa~~
61<l~.-.-
S$EII
S$71
$341.
S3llk
&tnte..... IICI
$3!tt
$311.
~ ~,.,.,..,,.,
!<0<
$411k
Wll
541k
$.10'1.
$10
$1Cll
~~
Si.4t
~~'~
fSI
e<\QI"II~:
Ut~'
C9~"'l
1Doii!J)J11!1t!!l
~1h
$litll)f~ l1110. 0l
~
~
s.3$t.
$)ctW~~~'1
W2$C:(!( 1 ...... 01
$S3t.
l31!~
n..-
5$&0 ~~ I 1 """ 0 t
$JI;~
~
$3$11
1' n'Ollmtnlo
$ ftllt"'
m.\
UP.
~CJV1l~l$
65t4~
62~t'N~I\I;:
"The EC [enrollment counselor] review matrix is all

smoke and mirrors so we could fly under the radar of
the DOE ... "
.,)lk
~ .qq~clb.,.ib
S..lllyOI>
$1 (f"Wol'll'Cnbt
51 cncllf!mntt
..
~lt/)'Oit
S61&pet ~ rn. O.t.
SG3l,.:r :t mo.. 0 T.
~IS P<'"
$43k
1m.
$1flt
APOL former enrollment counselor

Source: Court documents. Hendow & Albertson vs. UOP. filed 2009
28
'&"0 0 1'
Accreditation ... the inmates running the asylum

What is Accreditation and why is it important?
The Accrediting Council for Independent

Colleges and Schools (ACICS)
Accreditation helps ensure that education

provided by institutions of higher education
meets acceptable levels of quality
ACICS BOARD OF COMMISIONERS

Dr. Gary R. Carlson - Chair Elect
Vice President, Academic Affairs
ITT Technical Institute
The Accreditation bodies are non-governmental

(non-profit) peer-reviewing groups
Ms. Mary Hale Barry

Senior Vice President, Chief Academic Officer
Schools must earn and maintain proper

Accreditation to remain eligible to participate in
Title IV Programs
Ms. Jill DeAtley

Vice President of Regulatory Review
Career Education Corporation
However, due to the peer-based composition of

the Accreditation boards, they cannot function
as a truly independent 3rd party review system
Mr. Francis Giglio

Director of Compliance and Regulatory Services
lincoln Educational Services
In many instances, for-profit institution's

representatives sit on the boards of their
own Accrediting body, inevitably influencing
the approval process and oversight of their own
institutions!
Mr. David M. Luce

Assistant Vice President, Accreditation and Licensing
Corinthian Colleges, Inc.
Mr. Roger Swartzwelder
Executive Vice President, General Counsel and Chief Compliance Officer
Education Corporation of America
"Not a/116 Board members shown
We have seen this before ... rating agencies and subprime mortgages.
Is for-profit Accreditation the new credit agency scandal?
29
Accreditation ... when you can't earn it, buy it

The latest trend of for-profit institutions is to acquire the dearly-coveted Regional Accreditation through the outright
purchase of small, financially distressed non-profit institutions
Regional Accreditation is the highest stamp of guality (Harvard is Regionally Accredited), and usually takes 5-10 years to earn
through a long peer review process of educational materials, curriculum , teachers, etc
But who wants to wait 5 years?!
Once acquired, these institutions can serve as a shell for the parent organization to funnel in thousands of students and continue
the growth cycle ...
Past examples are Bridgepoint buying Regionally-Accredited Franciscan University of the Prairies (renamed Ashford University)
and more recent examples are ITT Tech buying Daniel Webster, and Corinthian Colleges buying Heald College
Bridgepoint Education (BPI) -a perfect model ...

BPI Total enrollment, 2005 -2008
Timeline
---
80,000
MARCH 2005- BPI acquires Regionally-Accredited

Franciscan University of the Prairies and renames
Ashford University. Ground enrollment= 312
70,000
60,000
53,688
50,000
BPI flows students through online platform ... grows

enrollment by 50,000+ students in 4 years
70,000
r--
40,000
31,558
,...----
30,000
Mgmt expects 70,000+ students by end of 2010
20,000
99% students now online, yet school retains its

Regional Accreditation
12,623
10,000
30
4,471
312
ll
Mar-05
2006
n
2007
2008
2009
2010E
Summary
The pace of the growth of the for-profit education industry and their growing claim to Federal monies
will require greater scrutiny to protect students and the integrity of Title IV lending
The primary revenue and profitability driver for the for-profit companies is unrestricted access to Title
IV loans and grants
For-profit education companies are now among the most profitable businesses in the world due to
government largesse
Regulations built around company-reported statistics are ineffective, and the Accreditation process
for for-profit schools and programs is compromised
Disaggregation of risk from reward is the fundamental cause of all problems
32
Solutions - Gainful employm ent
Gainful employment gets at part of the problem because it deals with debt loads, but verification is
problematic
Programs DO NOT have to be shut down for schools to remain compliant with new regulations
Companies can restructure their business to accommodate the regulation and schools would
become more affordable and student debt loads would be lower
However, a gainful employment metric would structurally reset the earnings power of companies
33
Solutions- Gainful employment analysis impact (key assumptions)

1. Cost of programs based on reported cost I credit hour and program length
2. Percent of degree financed assumes Title IV% revenues less 10% (transfer credits and cash)
3. Debt service payment based on 7.5/o interest rate (6.8% government loans I 12% private) and 10yr repayment period
4. Starting salaries taken from applicable BLS codes, by program category and job type
5. Debt service I income ratio of 8% based on Gainful Employment proposed regulation
6. Student mix by program level and program type used to calculate total revenue impact
7. Cost cuts estimated on a per-school basis, based on disclosed cost categories and industry experts
8. EPS impacts and PIE ratios based on existing reported information, share counts, and current
street EPS estimates
9. Scenario 1: Gainful Employment with no Offsetting Cost Cuts
10. Scenario 2: Gainful Employment with 5%-15% Cost Cuts
34
Gainful employment and APOL
APQ.b
Scenario 1
Scenario 2
$4.22
$4.22
2009 EPS impact
$1.32
-69%
$2.12
-50%
Street 2010 EPS Estimate
$5.07
$5.07
($2.90)
($2.10)
2009 EPS impact
$2.17
-57%
$2.97
-41%
Current P/ E (2010 EPS)
10.8
10.8
2010 Pro-forma P/E
25.4
18.5
Actual 2009 EPS

2009 EPS (adjusted)
EPS Impact
2010 EPS (adjusted)
Note: PIE Ratios calculated as of 512112010
Source: Company-reported financials, programs, tuition rates, and management conference calls. Street EPS estimates from Bloomberg. Projections based on programlevel tuition adjustments to comply with 8% debt servicehncome ratio and scenario 2 applies 5-15% cost cuts across education and SG&A to offset revenue declines.
35
Gainful employment and ESI
Scenario 1
Scenario 2
Actual 2009 EPS

2009 EPS (adjusted)
2009 EPS impact
$7.91
($0.22}
-103%
$7.91
$2.02
-74%

EPS Impact
2010 EPS (adjusted)
2009 EPS impact
$11.05
$11.05
($8.13)
($5.89)
$2.92
-74%
$5.16
-53%
10.0 X
37.6 X
10.0
21.3
ESI

Pro-forma P/E
X
X
36
Gainful employment and COCO
coco
Scenario 1
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact

Pro-forma P/E
Scenario 2
$0.81
$0.81
($0.76}
-194%
$0.17
$1.67
$1.67
($1.57)
($0.64)
$0.10
-94%
$1.03
-38%
9.0 X
153.5 X
9.0 X
14.6 X
-79%
37
Gainful employment and EDMC
Scenario 1
Scenario 2
$0.87
($5.50)
-732%
$0.87
($2.21}
-353%
$1.51
$1.51
($6 .37)
($3.08)
2010 EPS (adjusted)

2009 EPS impact
($4.86}
-422%
($1.57}
-204%
14.6 X
14.6 X
Pro-forma P/E
~4.5}x
~14.0~x
EDMC
Actual 2009 EPS
EPS (adjusted)
EPS impact
EPS Impact
38
Gainful employment and WPO (Kaplan)
WPO (Kaplan)
Scenario 1
Scenario 2
$9.78
($33.25}
-440%
$9.78
($6.19)
-163%
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact
Pro-forma P/E
39
If these trends continue_, we believe the DOE will face nearly $275B in defaults over
the next 10 years on a half-a-trillion dollars of lending to the For-Profit Industry
Projected Cumulative Stafford Loans (in $ Billions) and Cumulative Defaulted Dollars
for For-Profit Education Students, 2007 - 2020
$550 ~----------------------------------------------------------------------------------------------------------------------------------------------------~
D Total Stafford Loans to FP students
$498
mProjected Defaulted Dollars
$500
$450
$423
And because of fees associated with

default, the government collects
approximately $1.20 on eveiY $1.00 lent...
$400
Ci)
~ $350
$358
a;
co
.3
::: $250
~
~
~
$301
... meaning For-profit students will owe

$330 Billion dollars on defaulted loans over
the next 10 vears
-; $300
$251
$200
$150
$100
$50
$0
IPjpl i
2007
IIJI!I!I!bl i
2008
!I
2009
2010
2011
2012
Source: College Board. National Center for Education Statistics, industry estimates
2013
40
2014
2015
2016
2017
2018
2019
2020
IRA SOHN CONFERENCE

Presentation by Steve Eisman
SUBPRIME GOES TO COLLEGE
May 26,2010
Good Afternoon. I would like to thank the Ira Sohn Foundation for the honor of speaking
before this audience. My name is Steven Eisman and I am the portfolio manager of the
FrontPoint Financial Services Fund. Until recently, I thought that there would never
again be an opportunity to be involved with an industry as socially destructive and
morally bankrupt as the subprime mortgage industry. I was wrong. The For-Profit
Education Industry has proven equal to the task.
The title of my presentation is " Subprime goes to College". The for-profit industry has
grown at an extreme and unusual rate, driven by easy access to government sponsored
debt in the form of Title IV student loans, where the credit is guaranteed by the
government. Thus, the government, the students and the taxpayer bear all the risk and the
for-profit industry reaps all the rewards. This is similar to the subprime mortgage sector
in that the subprime originators bore far less risk than the investors in their mortgage
paper.
In the past 10 years, the for-profit education industry has grown 5-10 times the historical
rate of traditional post secondary education. As of 2009, the industry had almost 10% of
the enrolled students but claimed nearly 25% of the $89 billion ofFederal Title IV
student loans and grant disbursements. At the current pace of growth, for- profit schools
will draw 40% of all Title IV aid in 10 years.
How has this been allowed to happen?
The simple answer is that they've hired every lobbyist in Washington D.C. There has
been a revolving door between the people who work or lobby for this industry and the
halls of government. One example is Sally Stroup. She was the head lobbyist for the
Apollo Group- the largest for-profit company in 2001-2002. But from 2002-2006 she
became Assistant Secretary of Post-Secondary Education for the DOE under President
Bush. In other words, she was directly in charge of regulating the industry she had
previously lobbied for.
From 1987 through 2000, the amount of total Title 1V dollars received by students of forprofit schools fluctuated between $2 and $4 billion per annum. But then when the Bush
administration took over the reigns of government, the DOE gutted many of the rules that
governed the conduct of this industry. Once the floodgates were opened, the industry
embarked on 10 years ofunrestricted massive growth.
[Federal dollars flowing to the industry exploded to over $21 billion, a 450% increase. ]
At many major-for profit institutions, federal Title IV loan and grant dollars now
comprise close to 90% of total revenues, up significantly vs. 2001. And this growth has
driven even more spectacular company profitability and wealth creation for industry
executives. For example, ITT Educational Services (ESI), one of the larger companies in
the industry, has a roughly 40% operating margin vs. the 7%-12% margins of other
companies that receive major government contracts. ESI is more profitable on a margin
basis than even Apple.
This growth is purely a function of government largesse, as Title IV has accounted for
more than 100% of revenue growth. Here is one of the more upsetting statistics. In fiscal
2009, Apollo, the largest company in the industry, grew total revenues by $833 million.
Of that amount, $1.1 billion came from Title IV federally-funded student loans and
grants. More than 100% of the revenue growth came from the federal government. But
of this incremental $1.1 billion in federal loan and grant dollars, the company only spent
an incremental $99 million on faculty compensation and instructional costs - that's 9
cents on every dollar received from the government going towards actual education. The
rest went to marketing and paying the executives.
But leaving politics aside for a moment, the other major reason why the industry has
taken an ever increasing share of government dollars is that it has turned the typical
education model on its head. And here is where the subprime analogy becomes very
clear.
There is a traditional relationship between matching means and cost in education.
Typically, families of lesser financial means seek lower cost institutions in order to
maximize the available Title IV loans and grants - thereby getting the most out of every
dollar and minimizing debt burdens. Families with greater financial resources often seek
higher cost institutions because they can afford it more easily.
The for-profit model seeks to recruit those with the greatest financial need and put them
in high cost institutions. This formula maximizes the amount of Title IV loans and grants
that these students receive.
With billboards lining the poorest neighborhoods in America and recruiters trolling
casinos and homeless shelters (and I mean that literally), the for-profits have become
increasingly adept at pitching the dream of a better life and higher earnings to the most
vulnerable of society.
But if the industry in fact educated its students and got them good jobs that enabled them
to receive higher incomes and to pay off their student loans, everything I've just said
would be irrelevant.
So the key question to ask is - what do these students get for their education? In many
cases, NOT much, not much at all.
Here is one of the many examples of an education promised and never delivered. This
article details a Corinthian Colleges-owned Everest College campus in California whose
students paid $16,000 for an 8-month course in medical assisting. Upon nearing
completion, the students learned that not only would their credits not transfer to any
community or four-year college, but also that their degree is not recognized by the
American Association for Medical Assistants. Hospitals refuse to even interview
graduates.
But let's leave aside the anecdotal evidence of this poor quality of education. After all
the industry constantly argues that there will always be a few bad apples. So let's put
aside the anecdotes and just look at the statistics. If the industry provided the right
services, drop out rates and default rates shouJd be low.
Let' s first look at drop out rates. Companies don' t fully disclose graduation rates, but
using both DOE data, company-provided information and admittedly some of our own
assumptions regarding the level of transfer students, we calculate drop out rates of most
schools are 50%+ per year. As seen on this table, the annual drop out rates of Apollo,
ESI and COCO are 50%-100%
How good could the product be if drop out rates are so stratospheric? These statistics are
quite alarming, especially given the enormous amounts of debt most for-profit students
must borrow to attend school.
As a result of these high levels of debt, default rates at for profit schools have always
been significantly higher than community colleges or the more expensive private
institutions.
We have every expectation that the industry' s default rates are about to explode.
Because of the growth in the industry and the increasing search for more students, we are
now back to late 1980s levels of lending to for profit students on a per student basis.
Back then defaults were off the charts and fraud was commonplace.
Default rates are already starting to skyrocket. It's just like sub prime- which grew at
any cost and kept weakening its underwriting standards to grow.
By the way, the default rates the industry reports are artificially low. There are ways the
industry can and does manipulate the data to make their default rates look better.
But don't take my word for it. The industry is quite clear what it thinks the default rates
truly are. ESI and COCO supplement Title lV loans with their own private loans. And
they provision 50%-60% up front for those loans. Believe me, when a student defaults
on his or her private loans, they are defaulting on their Title IV loans too.
[Let me just pause here for a second to discuss manipulation of statistics. There are two
key statistics. No school can get more than 90% of its revenue from the government and
2 year cohort default rates cannot exceed 25% for 3 consecutive years. Failure to comply
with either of these rules and you lose Title IV eligibility. Lose Title IV eligibility and
you' re company ' s a zero.
Isn' t it amazing that Apollo' s percentage of revenue from Title IV is 89% and not over
90%. How lucky can they be? We believe (and many recent lawsuits support) that
schools actively manipulate the receipt, disbursement and especially the return of Title IV
dollars to their students to remain under the 90/10 threshold .]
The bottom line is that as long as the government continues to flood the for profit
education industry with loan dollars AND the risk for these loans is borne solely by the
students and the government, THEN the industry has every incentive to grow at all costs,
compensate employees based on enrollment, influence key regulatory bodies and
manipulate reported statistics- ALL TO MAINTAIN ACCESS TO THE
GOVERNMENT'S MONEY.
In a sense, these companies are marketing machines masquerading as universities. And
when the Bush administration eliminated almost all the restrictions on how the industry is
allowed to market, the machine went into overdrive. [Let me quote a bit from a former
employee ofBPI.
"Ashford is a for profit school and makes a majority of its money on federal loans students take out. They conveniently
price tuition at the exact amount that a student can qualify for in federal loan money. There is no regard to whether a
student really belongs in school, the goal is to enroll as many as possible. They also go after Gl bill money and currently
have separate teams set up to specifically target military students. If a person has money available for school Ashford
finds a way to go alter them. Ashford is just the middle man, profiting off this money. like milking a cow and working the
system within the limits of what"s technically legal, and paying huge salaries while the student suffers with debt that can "t
even be forgiven by bankruptcy. We mention tuition prices as little as possible .. this may cause the student to change
their mind.
While it is illegal to pay commissions for student enrollment, Ashford does salary adjustments, basically the same thing.
We are given a matrix that shows the number of students we are expected to enroll. We also have to meet our quotas
and these are high quotas.
Because we are under so much pressure, we are forced to do anything necessary to get people to fill out an application our jobs depend on it.
It's a boiler room - selling education to people who really don't want it."
This former employee then gives an example of soliciting a sick old lady to sign up for Ashford to
meet his quota.
"The level of deception is disgusting- and wrong. When someone who can barely afford to live and feed kids as it is. and
doesn "t even have the time or education to be able to enroll, they drop out. Then what? Add $20,000 of debt to their
problems- what are they gonna do now. They are officially screwed. We know most of these people will drop out, but
again, we have quotas and we have no choice." ]
How do such schools stay in business? The answer is to control the accreditation
process. The scandal here is exactly akin to the rating agency role in subprime
securitizations.
There are two kinds of accreditation -- national and regional. Accreditation bodies are
non-governmental, non-profit peer-reviewing groups. Schools must earn and maintain
proper accreditation to remain eligible for Title IV programs. In many instances, the forprofit institutions sit on the boards of the accrediting body. The inmates run the asylum .
Historically, most for profit schools are nationally accredited but national accreditation
holds less value than regional accreditation. The latest trend of for profit institutions is to
acquire the dearly coveted Regional Accreditation through the outright purchase of small,
financially distressed non-profit institutions and then put that school on-line. In March
2005, BPI acquired the regionally accredited Franciscan University of the Prairies and
renamed it Ashford University. [Remember Ashford. The former employee I quoted
worked at Ashford.] On the date of purchase, Franciscan (now Ashford) had 312
students. BPI took that school online and at the end of2009 it had 54,000 students.
SOLUTIONS
While the conduct of the industry is egregious and similar to the sub prime mortgage
sector in just so many ways, for the investment case against the industry to work requires
the government to do something --whereas in subprime all you had to do was wait for
credit quality to deteriorate.
So what is the government going to do? It has already announced that it is exploring
ways to fix the accreditation process. It will probably eliminate the 12 safe harbor rules
on sales practices implemented by the Bush Administration. And I hope that it is lookjng
at everything and anything to deal with this industry.
Most importantly, the DOE has proposed a rule known as Gainful Employment. In a
few weeks the DOE will publish the rule. There is some controversy as to what the
proposed rule will entail but I hope that the DOE will not backtrack on gainful
employment. Once the rule is published in the federal registrar, the industry has until
November to try to get the DOE to back down .
The idea behlnd the gainful employment rule is to limit student debt to a certain level.
Specifically, the suggested rule is that the debt service-to-income-ratio not exceed 8%.
The industry has gotten hysterical over this rule because it knows that to comply, it will
probably have to reduce tuition.
[Before I tum to the impact of the rule, let me discuss what happened last week. There
was a news report out that Bob Shireman, the Under Secretary of Education in charge of
this process was leaving. This caused a massive rally in the stocks under the thesis that
this signaled that the DOE was backing down from gainful employment. This conclusion
is absurd. First, of all, inside D.C. it has been well known for a while that Shireman
always intended to go home to California after a period of time. Second, to draw a
conclusion about the DOE changing its policy because Shireman is leaving presupposes
that one government official, one man, drives the entire agenda of the U.S. government.]
I cannot emphasize enough that gainful employment changes the business model. To
date that model has been constant growth in the number of students coupled with
occasional increases in tuition. Gainful employment will cause enrollment levels to grow
less quickly . And the days of raising tuition would be over; in many cases, tuition will go
down.
To illustrate the impact of gainful employment, I've chosen 5 companies, Apollo, ESI,
COCO, EDMC and the Washington Post. Yes, the Washington Post, whose earnings are
all driven by this industry.
Assuming gainful employment goes through, the first year it would impact would
obviously be 2011. However, because the analysis is so sensitive to tuition levels per
school, it's best to have as much information as possible. So for analytical purposes, we
are going to show the impact on actual results in fiscal 2009 and this year' s estimates
under the assumption that gainfuJ employment was already in effect.
We employ 2 scenarios. Scenario 1 is static. It takes actual results and then reduces
tuition costs to get down to the 8% level. Scenario 2 is dynamic. It assumes the same
thing as scenario 1 but then assumes the companies can reduce costs by 5%-15%.
Results for each company depend largely on the mix of students, the duration of each
degree and the price of tuition at each institution
For each company, I show the results under the two scenarios and the corresponding
PIEs. Needless to say, the PIE multiples look quite a bit different under either scenario.
Apollo - In fiscal 2009, the company earned $4.22. The consensus estimate for fiscal
2010 is $5.07. Under scenario 1, fiscal2009 and the fiscal2010 estimate get cut by 69%
and 57%, respectively. Under scenario 2, it gets cut 50% and 41%, respectively.
ESI- In fiscal 2009, the company earned $7.91 . The consensus estimate for fiscal 2010
is $11.05. Under scenario 1, fiscal 2009 turns slightly negative and the fiscal 2010
estimate gets cut by 74%. Under scenario 2, fiscal 2009 declines by 75% and the 2010
estimate gets cut by 53%.
COCO - In fiscal 2009, the company earned $0.81. The consensus estimate for fi seal
2010 is $1.67. Under scenario 1, fiscal2009 turns negative and the fiscal 2010 estimate
gets cut by 94%. Under scenario 2, fiscal 2009 declines by 79% and the 2010 estimate
gets cut by 38%.
EDMC --In fiscal 2009, the company earned $0.87. The consensus estimate for fiscal
2010 is $1.51. Under scenario 1, fiscal2009 and the fiscal2010 estimate turns massively
negative. Under scenario 2, fiscal 2009 and the fiscal 2010 estimate are also massively
negative, just less massively than scenario 1. The principal reason why the numbers are
so bad for EDMC is that they have a lot of debt and that debt has to be serviced and
cannot be cut.
Washington Post- The Post's disclosure of Kaplan metrics is slight. Thus, analyzing the
impact from gainful employment is much more difficult and we have confined our
analysis solely to fiscal 2009. In fiscal 2009, WPO earned $9.78. Under scenario I , a
loss of $33.25 per share occurs. Under scenario 2, there is still a loss of $6.19. The
principal reason why the numbers are so bad for the Post is that more than 100% of its
EBIDTA comes from this industry through its Kaplan division.
[Let me just add one caveat to our analysis. Implementation of gainful employment
could result in a cut in marketing budgets. Given the high drop out rates of this industry
any such cuts could turn a growth industry into a shrinking industry. The numbers that I
just showed do not assume that the industry shrinks but grows at a slower pace.]
Under gainful employment, most of the companies still have high operating margins
relative to other industries. They are just less profitable and significantly overvalued.
Downside risk could be as high as 50%. And let me add that I hope that gainful
employment is just the beginning. Hopefully, the DOE will be looking into ways of
improving accreditation and of ways to tighten rules on defaults.
Let me end by driving the subprime analogy to its ultimate conclusion. By late 2004, it
was clear to me and my partners that the mortgage industry had lost its mind and a
society-wide calamity was going to occur. It was like watching a train wreck with no
ability to stop it. Who could you complain to? -- The rating agencies? -they were part
of the machine. Alan Greenspan? - he was busy making speeches that every American
should take out an ARM mortgage loan. The OCC? -- its chairman, John Dugan, was
busy suing state attorney generals, preventing them from even investigating the subprime
mortgage industry.
Are we going to do this all over again? We just loaded up one generation of Americans
with mortgage debt they can ' t afford to pay back. Are we going to load up a new
generation with student loan debt they can never afford to pay back. The industry is now
25% ofTitle IV money on its way to 40%. If its growth is stopped now and it is policed,
the problem can be stopped. It is my hope that this Administration sees the nature of the
problem and begins to act now. If the gainful employment rule goes through as is, then
this is only the beginning of the policing of this industry.
But if nothing is done, then we are on the cusp of a new social disaster. If present trends
continue, over the next ten years almost $500 billion of Title IV loans will have been
funneled to this industry. We estimate total defaults of$275 billion, and because of fees
associated with defaults, for profit students will owe $330 billion on defaulted loans over
the next 10 years.
[Bracketed Sections might be deleted during the verbal speech because of lack oftime.]
Bashford, Terry
From:
Sent:
To:
Subject:
Attachments:
Yuan , Georgia
Bergeron, David ; Madzelan , Dan ; Finley, Steve
FW: For-profit education industry
EismanSohnConference .doc; ED Presentation_SOHN.PPT; ED_GE MATRIX_2.xls
(b)(5)
Georgia
From: Martin~ Carmel
Sent: Friday~ May 28~ 2010 3:50 PM
To: Miller~ Tony; Rogers~ Margot; Cunningham~ Peter;
Gabriella; Shireman~ Bob; Yuan~ Georgia
Cc: Duran~ Maribel
Subject: FW: For-profit education industry
FYI. You may have gotten directly but just in case.
worth asking Maribel to give to Arne.
Rose~
I~ll
Charlie;
Kanter~
Martha;
Gomez~
take a look to see if any of it is
From: Eisman~ Steven [mailto:seisman@fppartners.com]

Sent: Friday~ May 28~ 2010 3:14 PM
Subject: For-profit education industry
Hello~
My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial
Services fund. I wanted to inform you that I recently spoke at the Ira Sohn conference in
New York and my topic was the for-profit education industry. My presentation was very
negative and I wanted to bring to your attention many of the unsaid or unknown aspects of
this industry. We have been researching for-profit schools for over a year now and are very
familiar with every part of these businesses. Attached are the speech I gave and the
presentation that was shared.
I have also attached a recent analysis we completed on the gainful employment proposal being
reviewed currently. Our purpose in the analysis is merel y to raise awareness on the how
critically important choosing the right metrics is to enact the intended outcomes. Our
analysis highlights how changing the key metrics (specifically the debt service % and the
repayment period) drastically affects the intended resu lts. For example~ while many schoo l s
will have to lower tuition (resulting in lower student debt levels) under the proposed 8%
debt service ratio and 10-yr repayment~ under a 10% ratio and a 15-yr repayment period~ many
schools will actually be able to raise tuition by 5% or more. Moving to a 20-yr repayment
with 10% ratio provides a much larger opportunity for nearly every school we~ve followed to
raise tuition substantially (in some cases by 20% or more). While I don~t claim to know the
Administration~s ultimate objectives~ I don~t believe raising student debt levels through
higher tuition is the intended outcome of the proposed regulation.
Let me be clear - the debate on gainful employment has nothing to do with "student access".
It has everything to do with revenue-per-student (and thus~ profit-per-student) for these
schools~ and that is why the for-profit industry is fighting so hard to loosen the metrics. I
just want to ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion~ if the Administration were to move substantially away from
the initial combination (8% ratio and a 10-yr repayment period)~ then it would be better off
to have no gainfu l employment ru le at all~ since a diluted version wi ll likely result in no
changes at the schools and no reduction in student~s debt l oads.
Should you have any questions on any of the information provided, I am available to discuss
any of our findings or assumptions.
Steven Eisman
FrontPoint Financial Services Fund
917-934- 1770
seisman@fppartners.com
SUMMARY PAGE FOR GAINFUL EMPLOYMENT OPTIONS

Key Assumptions forGE calculations
1. CosI of programs based on reported oost I credit hOur and program length
3. Debt service payment based on 7.5% interest rate (6.8% gov't loans / 12% private)
6. Assume 4% tuition increase per year for 2 and 4 year degree oost estimates
CURRENT ANNUAl TUITION (REVENUE PER STUDENT!
AVERAGE COST OF A 2-YR DEGREE
5 COMPANY AVERAGE
CUtrent avmge annuli tuttlon
CuiTtnf avera e tost to a 2 d ....
~~6,811
Current vn_
Ge startlna nlarv of orads
CWTenravera ecostfoa .. d
$34,295
ru
$71389
S35,Q.I7
Catnful emQ!!!tMMl SCtnar10S
GainfUl t me!e:.:;rnent setnar-los
GainfUl tMe!~mtnt SCM8r'IOS.
New ave~e amual t!Jdon ooder dlnerent GE tcenar1os
New (OSt for a 2yr degree under clitfererv GE sc:enar10$
Hew C05t or a 4.yr degree under different GE scenartos
$12,84$
($3,*1
15-yr rep~~yment
$15,047
0.1t11 fron' cutrent c:o~
($1,18~)
20-yl' repayment
Delta from current cost
$~~
8'4 ....10
10%ra.tlo
r.wJI2
10-yr repayment
Otlta flom euntnt CO$.t
$14,807
2<%
($2,004)
-12%
15-yr repaymtnt
$17,560
-10%
-1~.
S74$
S1G,453
$2,642
1Oyr repayment
O.lte fl'cm current cost
4%
O.~a
from eu~nt eo't
20yr repayment
16%
Delta from current c:ost
($$,09~
$30,695
($(1.800)
$33.786
1$5091
8%""'
10'.:(.ratlo
$26,21)1
~%
($4.088)
10%
$35,822
$1,526
_,.,.
$39.685
$$,390
10'fflrado
$54,~
12%
1Oyr repayment
0.~ frcm curreNt CO$l
($1&,343)
4%
1$yr repayment
Pthe frc:YI'I eul'ffont co"'r
$63,895
($7,494)
16%
20-yr ttpaymtnt
Delta from c.urrent c.ost
$70;320
($1,060)
$30,207
24'1(;
$&2,87$
(S$,510)
12%
Ill%
$74,566
$3.178
4%
1"4
$82.608
$11.21.8
16%
............. "'"'"""
b.,fl""""" ''"'""'"
t WI''1't:!TUHTr'''lf
~H~I~::,ut!U!lUUi!!!~U!
tlt'J''t~n'1'HI1't'i"''H
,.,
..
~!Ill!
rn
1111111111111
r''"''
!!U!,!i
IIIII III' ,IJII
,..,.,
1m:
11:11
...,
.....
!Ill
....
~
I
r.m
~'I
rl!,
f''''
Lu,
''"
,,,,,
l!~:! IIiiii ~ J!IJI
t!lllllllllll!ll
....
~
...
j lflllmt,I'O'IIII'I'I'"'I
f "'""'"""'""'""""
"""'"'"'
"""""'
...........
IUt HIHUttt\
li
""""''~!!
1'II
Joil
Jl II
IIll
!I!~
.ji!,lll
l,('!ll
r""
Ill,Ill!
1111111'
1111!.1!!
II!II
!li ltlilllil
"IIIWIUUII' !ljlillll!!!
~"fl"'"""'
............
~WI' 'l'lWt'UHTr'''lf
,...,
p!!!il
rn
1111111111111
fillill
.!tu!,t
i!illllll'
,IJII
,..,.,
1m:
!1:11
....,
i!lll
'""
'""
IJIL
r.m
~ n
~!I
f''''
1....
l.t,l,,
.1!1.!
Lt.I,
!I ,I I ~! !L~ I
'"'
~ ................ ll!lll!>ll"
L.......... ,.,.., '"'"""
r'~"'"
...........
""'
"''
"""'""
IUtHIHUttt\
L..
"""""
"""""!!!
1'
l !:i
lIll
IIll
F""
!11~1 1:!~ ;: \l ~r,i~
1..
!!I
~"fl"'"""'
............
,...,
p!!!il
rn
1111111111111
fillill
.!tu!,t
i!illllll'
,IJII
,..,.,
1m:
!1:11
....,
i!lll
'""
'""
IJIL
r.m
~ n
~!I
f''''
1....
l.t,l,,
.1!1.!
Lt.I,
!I ,I I ~! !L~ I
'"'
~"'''ttilililtlill<li'll'l'
..........
f li'
....
''""'"'
""'
............
"""""!!! 1'
l :!I
lIll
IIll
F""
!11~1 1:!~ ;: \l ~r,i~
1..
!!I
IIIJ!!I!I!!!II!I!~!IIII!~!!!!!I
1"'
Jill
lUI
1111
ll!lll!lili!IIH!II
.. ,o; ..
...,...
""
...............
i l !i!l!l!l~lnll
i7
.,.
!lli
P'
nr:
.Jt
I'"
~
>u
lli!,!JI!l!!lliilll
..
II
~;:
""
l l~:mililu!l l la
ll!lll!lilllllii!JI
.. ,o; ..
...,...
""
...............
i l !i!l!l!l~lnl
i7
.,.
!lli
P'
nr:
.Jt
I'"
~
>u
lli!,!JI!l!!lliilll
..
D
;;;
""
lll~:mililu!ll la
n>l l'l l l'l"! '~ ~
.:: ;;;.-.:::~
r~t-
111
~:.
~~:::-
r~t-
111
~:.
111
~~:::-
r~t-
111
~:.
111
~~:::-
r~t-
111
~:.
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
M1ffliiliillmilill!H
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
rl
0
N
Disclosures
investment loss.
QJ
,........
~
ta
on
QJ
.....-4
.....-4
0
,........
,........
~
~
CI':J
QJ
on
QJ
~
~
8
~
~
,.Q
en
25% ~----------------------------------------------------------------------------------~
20%
15%
10%
5%
0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

In 1990...
were for-profit. ..
9%
~---==~~==~~~~~~
30%
8%
25%
7%
6%
20%
5%
15%
4%
3%
10'/,

*
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
S% J
I !
I I
I f
I 1 I
I i
I I
I I
I I
I I
I I
~~~~~~~~~*~~~&~~~~~~
~ ~~ ~~ ~~ ~~ ~~ f~ ~~ ~~ ~~
In 2009 ...
25% of schools are

'l
27o/o ~---------------------------------------------------------------------------------------------------------------------------------------------------------~
26%
25%
24%

23%
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
7%
1998
1999
2000
0 Pell grants
2001
2002
2003
2004

7
2005
2006
2007
2008
2009



Education and Labor
Name
Former DOE position
William Hansen
APOLLO GROUP
Jonathan Vogel
Lauren Maddox
Podesta Group
Rebecca Campoverde
Kaplan, Inc.
KAPLAN, INC
Victor F. Klatt Ill
APOLLO GROUP
Dollars in billions
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2006
2006
2007
2008
2009
Total
Total
Pell Grants
Stafford Loans
$3.5
$7.3
$8.0
$3.8
$4.5
$8.2
$4.8
$8.3
$4.9
$8.8
$5.8
$9.5
$6.2
$9.9
$5.7
$14.1
$5.5
$19.9
$5.5
$22.8
$5.8
$25.1
$6.3
$26.3
$7.2
$27.2
$7.2
$28.4
''''
''''''''
$8.0
$29.6
$10.0
$32.1
$11.6
$36.6
$12.7
$41.6
$13.1
$46.7
$12.7
$48.0
$12.8
$49.4
$14.7
$66.8
$18.2
$70.9
Pel/ Grants
quadrupled from $1
For profit
Pell Grants
$0.9
$1.0
$1.1
$1.1
$1.1
$1.2
$1.1
$0.9
$0.7
$0.7
$0.7
$0.8
For profit
Stafford Loans
$1.8
$2.1
$2.3
$1.9
$1 .5
$1 .3
$1 .0
$1.4
$2.0
$1 .9
$2.2
$2.3
$2.6
$3.0
$3.4
$4.1
$6.2
$6.6
$7.9
$8.8
$9.6
$12.4
$17.0
Total
For ~rofit
$2.7
$3.1
$34
$3.0
$2.6
$2.5
$2.1
$2.3
$2.7
$2.6
$2.9
$3.0
$3.5
For profit share

For profit share
Pell Grants
Stafford Loans
25%
25%
27%
27%
24%
28%
23%
23%
22%
17%
21%
14%
18%
10%
15%
10%
13%
10%
13%
8%
12%
9%
12%
9%
13%
10%
13%
10%
''''''''
14%
12%
13%
14%
16%
14%
16%
16%
18%
17%
19%
18%
19%
19%
.21%
22%
24%
24%

$21 billion in 2009
Year
2007
2008
2009
20 10
20 11
2012
2013
20 14
20 15
2016
2017
20 18
20 19
2020
Total
Enrollment
7%
8%
8%
9%
10%
10%
11%
12%
13%
14%
16%
17%
18%
20%
c:

Total
Pelt
Stafford
Schools
Grants
Loans
23%
19%
19%
22%
24%
21%
24%
25%
24%
25%
26%
25%
27%
27%
26%
28%
29%
27%
30%
28%
30%
31%
30%
31%
33%
32%
31%
35%
34%
32%
36%
35%
33%
38%
37%
35%
:ifWr.
39%
40%
..
40%
38%
43%

--- -11 . .\

=::::>


Non-12rofits
For-12rofits
$50.2
$12.0
$56.0
$15.5
$67.6
$21.4
$24.3
$7 1.9
$27.7
$76.5
$81 .2
$31 .5
$86.2
$35.8
$91.4
$40.8
$96.9
$46.4
$102.5
$52.8
$108.4
$60.1
$68.5
$114.4
$77.9
$120.6
$88.8 .......
$126.9

.
.
Total
Title IV
19%
22%
24%
25%
27%
28%
29%
31%
32%
34%
36%
38%
40%
42%
10
2001
2009
Other,
11 %
Apollo Group
Other,
Title IV,
48%
52%
Title IV,
89%
ITT Technical
Institute
65%
85%
11

$165
$155
$145
$135
$125
$115
$105
45% -- - - 40%
35%
30%
$95
$85
$75
$65
$55
$45
$35
$25
25%
20%
15% ~----~~----~~----~~----~~-.--.-,-~
...,o:t:::>ro "'u~ro
-- ..,u-.,.o: ...,o: "'0: ..,u-- .,.o: ...,o: "'0: ..,o: .,.u-- ...,uc "'0: ..,o: .,.o:
n
t:::>ro
...,o:
n~
coco
ESI
APOL
2007
2008
2009
$9,834,695
$8,923,79 1
$14,366,540
$4,938,982
$8,849,386
$1 1,222,377
$ 10,441,170
$26,766,979
$34,707,377
3-yr total comp
$33,125,026
$25,010,745
$71,915,526
12
Total
$25,2 14,847
$44,540,156
$60,296,294
35o/o ~------~--------------------------------------------------------~
45% ~--------------------------------------------------~
40%
37.4%
30%
29.0%
35%
25%
30%
19.8%
25%
20%
20%
15%
15%
12.1%
9.9%
10%
9.8%
10%
18.4%
9.5%
9.1%
Lockheed
Martin
Home Depot
7.4%
5%
5%
0%
0%
ITT Technical
Institute
Lockheed
Martin
Raytheon Corp
Northrup
Grumman
Boeing
ITT Technical
Institute
Apple
Computer
Procter &
Gamble

13

Total revenues
Year-year growth
Title IV revenues
Year-year growth
2007
2008
$2,724
$3,141
$417
77%
65%
$1,770
2009
$3,974
$833
89%
$2,419
$648
$3 537
( $1,119
155%
134%
2007
2008
2009
Total revenues
Year-year growth
$919
$1 ,069
$149
81 %
$1 ,308
$239
89%
$866
$174
$1,163
$297
117%
124%
Title IV revenues
Year-year g rowth
75%
$691
2007
2008
2009
Total revenues
Year-year growth
$758
$870
$112
73%
$1,015
$146
85%
$635
$157
$863
$228
141%
157%
Title IV revenues
Year-year growth
63%
$477

Dollars in millions
14
v~

IV dollars ...

instructional costs
Title IV dollars?
Lesser Means
Greater Means
-D-
-D-
(Private Colleges)

Lesser Means
-D[

15
..
Q)
"'d
0
east Saf N"wa ~

college
(AAMA)
~ ll t
!!fl
... ..

for potential jobs
By Tomas Roman


17
APOL
+ New students
2006
278,300
216,600
(212,600)
Ending enrollment
282,300
Graduation rate
Graduates
Drop outs
28%
61,390
151,210
54%
2007
282,300
258,500
(227, 100~
2008
313,700
288,200
(239,800)
2009
362,100
355,800
(274,900)
313,700
362,100
443,000
28%
72,338
154,762
52%
28%
78,484
161 ,316
48%
28%
83,440
191 ,460
48%

ESI
+ New students
2006
42,985
49,935
(46,024)
2007
46,896
54,593
(48,462)
2008
53,027
65,313
(56,357)
2009
61,983
85,928
(67,145)
Ending enrollment
46,896
53,027
61 ,983
80,766
Graduation rate
Graduates
Drop outs
44%
18,449
27,575
61%
44%
19,774
28,688
57%
44%
21 ,983
34,374
60%
44%
25,302
41 ,843
59%
........._

coco

overstated
+ New students
2006
66,114
92,185
(97,335)
2007
60,964
90,105
(89,737)
2008
61 ,332
100,210
(92,331)
2009
69,211
11 7,352
(100,475)
Ending enrollment
60,964
61,332
69,211
86,088
Graduation rate
Graduates
Drop outs
33%
20,968
76,367
120%
33%
20,179
69,558
114%
33%
21 ,540
70,791
108%
33%
25,624
74,851
96%

I


FY2008)
JC<t ~
m
2f~
1t~ 1~~
0 1931 D ii95
46_.!~:;
c 1Y,.J t995 Ji11 1S.'!l&
0 1~7 [] 19: - ~~ 20~ El:!>Jt . ::m:J

1 ~;
1t'!'i
!'"i.
c-e
;\1~
Pl.f)t~ ~!~~:
Pn>!3:e FGfDrl:m
19
Traditional vs.
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
For-~rofit
Total
Enrollment
1%
2%
2%
2%
2%
2%
2%
2%
2%
2%
2%
3%
3%
3%
3%
4%
4%
5%
6%
6%
7%
8%
8%

Stafford
Total
Pell
Schools
Grants
Loans
10%
26%
26%
10%
27%
27%
24%
28%
10%
10%
23%
23%
10%
22%
17%
9%
21%
14%
9%
18%
10%
10%
9%
15%
9%
13%
10%
9%
13%
8%
15%
12%
9%
16%
12%
9%
10%
17%
13%
18%
13%
10%
19%
14%
12%
19%
14%
13%
19%
15%
14%
20%
16%
16%
17%
21%
18%
22%
19%
18%
23%
19%
19%
24%
21%
22%
26%
24%
24%
Total
Title IV
~
27%
27%
23%
19%
16%
13%
12%
11%
9%
9%
9%
10%
11%
12%
13%
14%
16%
17%
18%
19%
22%

Per Student
All schools
Non-erofit
$842
$643
$899
$670
$933
$697
$948
$740
$954
$788
$895
$1,053
$989
$1 ,120
$1,385
$1 ,246
$1,780
$1 ,616
$11,339
$1 ,827
$8,402
$1 ,967
$1 ,974
$8,910
$2,131
$2,249
$2,093
$8,317
$2,329
$2,154
$8,152
$2,323
$2,130
$8,681
$2,351
$2,139
$8,533
$2,531
$2,278
$9,349
$2,848
$2,543
$9,786
$3,146
$2,783
$9,909
$3,364
$2,947
$10,153
$3,420
$2,968
$10,498
$3,407
$2,944
$10,074
$3,740
$3,173
$10,541
$4,626
$3,744 C $13,247
20
$16,000
24%
$15,000
$14,000
r;
,;~
20%
r
r
Ill
1: $13,000
16%
Q.l
"0
0::
:I
~
~ $12,000
{)
iii
a.
12%
Q.l
.. $11,000
UJ
j::
iii
.... $10,000
l1
r-
8%
I'""
,....,
$9,000
4%
I'""
I'""
$8,000
$7,000
I I I
I 1 I
I I I
I 1 I
I I I
I 1 I
I I I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~
:
:t:
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
~
21
I Oo/o
42o/o ~-----------------------------------------------------------------------------------------------------,
40%
40%
I -+- 2-yr rates
- - - 3-yr rates ]
38%
36%
34%
32%
30%
28%
26%
24%
22%
21 %
20%
18%
16%
14%
12%
11 %
11 %
10o/o +---------------------.--------------------,---------------------.---------------------.--------------------~
2004
2005
2006
22
2007
2008


ESI
coco
$16,959
$2,100
$14,443
$1 ,770
$19,059
$16,213
60%
($1 ,060)
68%
($1 ,027)
$8,792
CS.4x
$4,282
4.2X
23

J


24

The 90/1 0 rule
loans grants)
25

0
26

AND
THEN
-Grow at all costs


Utrolll\ttllb.
-e
~UonofWall
Otol!>c"'~l)

.fSe."""'lm<nls
4 S~nw>lo
1~0SJil'llf~

application ..."
4& Clll<lfln!Mit
4$41111llso~


counselor
,,01<
$7:01\611$m
S2i9\
$29\
SUk
""~
~'
~n:
)1!(
~
31:
iSZCIIIot-
l~k
S24k
$25"~
$.u t,
ua
Wl
&itfltll~
61tnr~
f38lt
SJ!llt
Qeooc~
I:J1lc
'*
8~
sm:
60 II!'Cih::r.b
oa~~
61<l~.-.-
S$EII
S$71
$341.
S3llk
&tnte..... IICI
$3!tt
$311.
~ ~,.,.,..,,.,
!<0<
$411k
Wll
541k
$.10'1.
$10
$1Cll
~~
Si.4t
~~'~
fSI
e<\QI"II~:
Ut~'
C9~"'l
1Doii!J)J11!1t!!l
~1h
$litll)f~ l1110. 0l
~
~
s.3$t.
$)ctW~~~'1
W2$C:(!( 1 ...... 01
$S3t.
l31!~
n..-
5$&0 ~~ I 1 """ 0 t
$JI;~
~
$3$11
1' n'Ollmtnlo
$ ftllt"'
m.\
UP.
~CJV1l~l$
65t4~
62~t'N~I\I;:

the DOE ... "
.,)lk
~ .qq~clb.,.ib
S..lllyOI>
$1 (f"Wol'll'Cnbt
51 cncllf!mntt
..
~lt/)'Oit
S61&pet ~ rn. O.t.
SG3l,.:r :t mo.. 0 T.
~IS P<'"
$43k
1m.
$1flt

28
'&"0 0 1'





Ms. Mary Hale Barry


Title IV Programs
Ms. Jill DeAtley


Mr. Francis Giglio


institutions!
Mr. David M. Luce

29


Timeline
---
80,000

70,000
60,000
53,688
50,000

70,000
r--
40,000
31,558
,...----
30,000
20,000

12,623
10,000
30
4,471
312
ll
Mar-05
2006
n
2007
2008
2009
2010E
Summary
IV loans and grants
government largesse
32
problematic
33

34
APQ.b
Scenario 1
Scenario 2
$4.22
$4.22
2009 EPS impact
$1.32
-69%
$2.12
-50%
$5.07
$5.07
($2.90)
($2.10)
2009 EPS impact
$2.17
-57%
$2.97
-41%
10.8
10.8
2010 Pro-forma P/E
25.4
18.5
Actual 2009 EPS

2009 EPS (adjusted)
EPS Impact
2010 EPS (adjusted)
35
Scenario 1
Scenario 2
Actual 2009 EPS

2009 EPS (adjusted)
2009 EPS impact
$7.91
($0.22}
-103%
$7.91
$2.02
-74%

EPS Impact
2010 EPS (adjusted)
2009 EPS impact
$11.05
$11.05
($8.13)
($5.89)
$2.92
-74%
$5.16
-53%
10.0 X
37.6 X
10.0
21.3
ESI

Pro-forma P/E
X
X
36
coco
Scenario 1
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact

Pro-forma P/E
Scenario 2
$0.81
$0.81
($0.76}
-194%
$0.17
$1.67
$1.67
($1.57)
($0.64)
$0.10
-94%
$1.03
-38%
9.0 X
153.5 X
9.0 X
14.6 X
-79%
37
Scenario 1
Scenario 2
$0.87
($5.50)
-732%
$0.87
($2.21}
-353%
$1.51
$1.51
($6 .37)
($3.08)
2010 EPS (adjusted)

2009 EPS impact
($4.86}
-422%
($1.57}
-204%
14.6 X
14.6 X
Pro-forma P/E
~4.5}x
~14.0~x
EDMC
Actual 2009 EPS
EPS (adjusted)
EPS impact
EPS Impact
38
WPO (Kaplan)
Scenario 1
Scenario 2
$9.78
($33.25}
-440%
$9.78
($6.19)
-163%
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact
Pro-forma P/E
39
$550 ~----------------------------------------------------------------------------------------------------------------------------------------------------~
$498
$500
$450
$423

$400
Ci)
~ $350
$358
a;
co
.3
::: $250
~
~
~
$301

the next 10 vears
-; $300
$251
$200
$150
$100
$50
$0
IPjpl i
2007
IIJI!I!I!bl i
2008
!I
2009
2010
2011
2012
2013
40
2014
2015
2016
2017
2018
2019
2020
IRA SOHN CONFERENCE

May 26,2010
paper.
clear.
graduates.
institutions.
GOVERNMENT'S MONEY.
employee ofBPI.
their mind.
meet his quota.
securitizations.
SOLUTIONS
down.
gets cut by 38%.
cannot be cut.
mortgage industry.
the next 10 years.
Bashford, Terry
From:
Sent:
To:
Cc:
Subject:
Attachments:
Martin, Carmel
Miller, Tony; Rogers , Margot; Cunningham, Peter; Rose, Charlie ; Kanter, Martha; Gomez,
Gabriella ; Shireman , Bob; Yuan, Georgia
Duran, Maribel
FW: For-profit education industry
FYI. You may have gotten directly but just in case. I'll take a look to see if any of it is worth asking Maribel to give to
Arne.
From: Eisman, Steven [mailto:seisman@fppartners.coml
Sent: Friday, May 28, 2010 3:14PM

Subject: For-profit education industry
Hello,
My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial Services fund. I wanted to
inform you that I recently spoke at the Ira Sohn conference in New York and my topic was the for-profit education
industry. My presentation was very negative and I wanted to bring to your attention many of the unsaid or unknown
aspects of this industry. We have been researching for-profit schools for over a year now and are very familiar with every
part of these businesses. Attached are the speech I gave and the presentation that was shared .
I have also attached a recent analysis we completed on the gainful employment proposal being reviewed currently. Our
purpose in the analysis is merely to raise awareness on the how critically important choosing the right metrics is to enact
the intended outcomes. Our analysis highlights how changing the key metrics (specifically the debt service % and the
repayment period) drastically affects the intended results. For example, while many schools will have to lower tuition
(resulting in lower student debt levels) under the proposed 8% debt service ratio and 10-yr repayment, under a 10% ratio
and a 15-yr repayment period , many schools will actually be able to raise tuition by 5% or more. Moving to a 20-yr
repayment with 10% ratio provides a much larger opportunity for nearly every school we've followed to raise tuition
substantially (in some cases by 20% or more). \1\/hile I don't claim to know the Administration 's ultimate objectives, I don't
believe raising student debt levels through higher tuition is the intended outcome of the proposed regulation.
Let me be clear- the debate on gainful employment has nothing to do with "student access". It has everything to do with
revenue-per-student (and thus, profit-per-student) for these schools, and that is why the for-profit industry is fighting so
hard to loosen the metrics. I just want to ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion , if the Administration were to move substantially away from the initial combination (8% ratio
and a 10-yr repayment period), then it would be better off to have no gainful employment rule at all, since a diluted version
will likely result in no changes at the schools and no reduction in student's debt loads.
Should you have any questions on any of the information provided , I am available to discuss any of our findings or
assumptions.
Steven Eisman
917-934-1770
rl
0
N
Disclosures
investment loss.
QJ
,........
~
ta
on
QJ
.....-4
.....-4
0
,........
,........
~
~
CI':J
QJ
on
QJ
~
~
8
~
~
,.Q
en
25% ~----------------------------------------------------------------------------------~
20%
15%
10%
5%
0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

In 1990...
were for-profit. ..
9%
~---==~~==~~~~~~
30%
8%
25%
7%
6%
20%
5%
15%
4%
3%
10'/,

*
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
S% J
I !
I I
I f
I 1 I
I i
I I
I I
I I
I I
I I
~~~~~~~~~*~~~&~~~~~~
~ ~~ ~~ ~~ ~~ ~~ f~ ~~ ~~ ~~
In 2009 ...
25% of schools are

'l
27o/o ~---------------------------------------------------------------------------------------------------------------------------------------------------------~
26%
25%
24%

23%
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
7%
1998
1999
2000
0 Pell grants
2001
2002
2003
2004

7
2005
2006
2007
2008
2009



Education and Labor
Name
Former DOE position
William Hansen
APOLLO GROUP
Jonathan Vogel
Lauren Maddox
Podesta Group
Rebecca Campoverde
Kaplan, Inc.
KAPLAN, INC
Victor F. Klatt Ill
APOLLO GROUP
Dollars in billions
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2006
2006
2007
2008
2009
Total
Total
Pell Grants
Stafford Loans
$3.5
$7.3
$8.0
$3.8
$4.5
$8.2
$4.8
$8.3
$4.9
$8.8
$5.8
$9.5
$6.2
$9.9
$5.7
$14.1
$5.5
$19.9
$5.5
$22.8
$5.8
$25.1
$6.3
$26.3
$7.2
$27.2
$7.2
$28.4
''''
''''''''
$8.0
$29.6
$10.0
$32.1
$11.6
$36.6
$12.7
$41.6
$13.1
$46.7
$12.7
$48.0
$12.8
$49.4
$14.7
$66.8
$18.2
$70.9
Pel/ Grants
quadrupled from $1
For profit
Pell Grants
$0.9
$1.0
$1.1
$1.1
$1.1
$1.2
$1.1
$0.9
$0.7
$0.7
$0.7
$0.8
For profit
Stafford Loans
$1.8
$2.1
$2.3
$1.9
$1 .5
$1 .3
$1 .0
$1.4
$2.0
$1 .9
$2.2
$2.3
$2.6
$3.0
$3.4
$4.1
$6.2
$6.6
$7.9
$8.8
$9.6
$12.4
$17.0
Total
For ~rofit
$2.7
$3.1
$34
$3.0
$2.6
$2.5
$2.1
$2.3
$2.7
$2.6
$2.9
$3.0
$3.5
For profit share

For profit share
Pell Grants
Stafford Loans
25%
25%
27%
27%
24%
28%
23%
23%
22%
17%
21%
14%
18%
10%
15%
10%
13%
10%
13%
8%
12%
9%
12%
9%
13%
10%
13%
10%
''''''''
14%
12%
13%
14%
16%
14%
16%
16%
18%
17%
19%
18%
19%
19%
.21%
22%
24%
24%

$21 billion in 2009
Year
2007
2008
2009
20 10
20 11
2012
2013
20 14
20 15
2016
2017
20 18
20 19
2020
Total
Enrollment
7%
8%
8%
9%
10%
10%
11%
12%
13%
14%
16%
17%
18%
20%
c:

Total
Pelt
Stafford
Schools
Grants
Loans
23%
19%
19%
22%
24%
21%
24%
25%
24%
25%
26%
25%
27%
27%
26%
28%
29%
27%
30%
28%
30%
31%
30%
31%
33%
32%
31%
35%
34%
32%
36%
35%
33%
38%
37%
35%
:ifWr.
39%
40%
..
40%
38%
43%

--- -11 . .\

=::::>


Non-12rofits
For-12rofits
$50.2
$12.0
$56.0
$15.5
$67.6
$21.4
$24.3
$7 1.9
$27.7
$76.5
$81 .2
$31 .5
$86.2
$35.8
$91.4
$40.8
$96.9
$46.4
$102.5
$52.8
$108.4
$60.1
$68.5
$114.4
$77.9
$120.6
$88.8 .......
$126.9

.
.
Total
Title IV
19%
22%
24%
25%
27%
28%
29%
31%
32%
34%
36%
38%
40%
42%
10
2001
2009
Other,
11 %
Apollo Group
Other,
Title IV,
48%
52%
Title IV,
89%
ITT Technical
Institute
65%
85%
11

$165
$155
$145
$135
$125
$115
$105
45% -- - - 40%
35%
30%
$95
$85
$75
$65
$55
$45
$35
$25
25%
20%
15% ~----~~----~~----~~----~~-.--.-,-~
...,o:t:::>ro "'u~ro
-- ..,u-.,.o: ...,o: "'0: ..,u-- .,.o: ...,o: "'0: ..,o: .,.u-- ...,uc "'0: ..,o: .,.o:
n
t:::>ro
...,o:
n~
coco
ESI
APOL
2007
2008
2009
$9,834,695
$8,923,79 1
$14,366,540
$4,938,982
$8,849,386
$1 1,222,377
$ 10,441,170
$26,766,979
$34,707,377
3-yr total comp
$33,125,026
$25,010,745
$71,915,526
12
Total
$25,2 14,847
$44,540,156
$60,296,294
35o/o ~------~--------------------------------------------------------~
45% ~--------------------------------------------------~
40%
37.4%
30%
29.0%
35%
25%
30%
19.8%
25%
20%
20%
15%
15%
12.1%
9.9%
10%
9.8%
10%
18.4%
9.5%
9.1%
Lockheed
Martin
Home Depot
7.4%
5%
5%
0%
0%
ITT Technical
Institute
Lockheed
Martin
Raytheon Corp
Northrup
Grumman
Boeing
ITT Technical
Institute
Apple
Computer
Procter &
Gamble

13

Total revenues
Year-year growth
Title IV revenues
Year-year growth
2007
2008
$2,724
$3,141
$417
77%
65%
$1,770
2009
$3,974
$833
89%
$2,419
$648
$3 537
( $1,119
155%
134%
2007
2008
2009
Total revenues
Year-year growth
$919
$1 ,069
$149
81 %
$1 ,308
$239
89%
$866
$174
$1,163
$297
117%
124%
Title IV revenues
Year-year g rowth
75%
$691
2007
2008
2009
Total revenues
Year-year growth
$758
$870
$112
73%
$1,015
$146
85%
$635
$157
$863
$228
141%
157%
Title IV revenues
Year-year growth
63%
$477

Dollars in millions
14
v~

IV dollars ...

instructional costs
Title IV dollars?
Lesser Means
Greater Means
-D-
-D-
(Private Colleges)

Lesser Means
-D[

15
..
Q)
"'d
0
east Saf N"wa ~

college
(AAMA)
~ ll t
!!fl
... ..

for potential jobs
By Tomas Roman


17
APOL
+ New students
2006
278,300
216,600
(212,600)
Ending enrollment
282,300
Graduation rate
Graduates
Drop outs
28%
61,390
151,210
54%
2007
282,300
258,500
(227, 100~
2008
313,700
288,200
(239,800)
2009
362,100
355,800
(274,900)
313,700
362,100
443,000
28%
72,338
154,762
52%
28%
78,484
161 ,316
48%
28%
83,440
191 ,460
48%

ESI
+ New students
2006
42,985
49,935
(46,024)
2007
46,896
54,593
(48,462)
2008
53,027
65,313
(56,357)
2009
61,983
85,928
(67,145)
Ending enrollment
46,896
53,027
61 ,983
80,766
Graduation rate
Graduates
Drop outs
44%
18,449
27,575
61%
44%
19,774
28,688
57%
44%
21 ,983
34,374
60%
44%
25,302
41 ,843
59%
........._

coco

overstated
+ New students
2006
66,114
92,185
(97,335)
2007
60,964
90,105
(89,737)
2008
61 ,332
100,210
(92,331)
2009
69,211
11 7,352
(100,475)
Ending enrollment
60,964
61,332
69,211
86,088
Graduation rate
Graduates
Drop outs
33%
20,968
76,367
120%
33%
20,179
69,558
114%
33%
21 ,540
70,791
108%
33%
25,624
74,851
96%

I


FY2008)
JC<t ~
m
2f~
1t~ 1~~
0 1931 D ii95
46_.!~:;
c 1Y,.J t995 Ji11 1S.'!l&
0 1~7 [] 19: - ~~ 20~ El:!>Jt . ::m:J

1 ~;
1t'!'i
!'"i.
c-e
;\1~
Pl.f)t~ ~!~~:
Pn>!3:e FGfDrl:m
19
Traditional vs.
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
For-~rofit
Total
Enrollment
1%
2%
2%
2%
2%
2%
2%
2%
2%
2%
2%
3%
3%
3%
3%
4%
4%
5%
6%
6%
7%
8%
8%

Stafford
Total
Pell
Schools
Grants
Loans
10%
26%
26%
10%
27%
27%
24%
28%
10%
10%
23%
23%
10%
22%
17%
9%
21%
14%
9%
18%
10%
10%
9%
15%
9%
13%
10%
9%
13%
8%
15%
12%
9%
16%
12%
9%
10%
17%
13%
18%
13%
10%
19%
14%
12%
19%
14%
13%
19%
15%
14%
20%
16%
16%
17%
21%
18%
22%
19%
18%
23%
19%
19%
24%
21%
22%
26%
24%
24%
Total
Title IV
~
27%
27%
23%
19%
16%
13%
12%
11%
9%
9%
9%
10%
11%
12%
13%
14%
16%
17%
18%
19%
22%

Per Student
All schools
Non-erofit
$842
$643
$899
$670
$933
$697
$948
$740
$954
$788
$895
$1,053
$989
$1 ,120
$1,385
$1 ,246
$1,780
$1 ,616
$11,339
$1 ,827
$8,402
$1 ,967
$1 ,974
$8,910
$2,131
$2,249
$2,093
$8,317
$2,329
$2,154
$8,152
$2,323
$2,130
$8,681
$2,351
$2,139
$8,533
$2,531
$2,278
$9,349
$2,848
$2,543
$9,786
$3,146
$2,783
$9,909
$3,364
$2,947
$10,153
$3,420
$2,968
$10,498
$3,407
$2,944
$10,074
$3,740
$3,173
$10,541
$4,626
$3,744 C $13,247
20
$16,000
24%
$15,000
$14,000
r;
,;~
20%
r
r
Ill
1: $13,000
16%
Q.l
"0
0::
:I
~
~ $12,000
{)
iii
a.
12%
Q.l
.. $11,000
UJ
j::
iii
.... $10,000
l1
r-
8%
I'""
,....,
$9,000
4%
I'""
I'""
$8,000
$7,000
I I I
I 1 I
I I I
I 1 I
I I I
I 1 I
I I I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~
:
:t:
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
~
21
I Oo/o
42o/o ~-----------------------------------------------------------------------------------------------------,
40%
40%
I -+- 2-yr rates
- - - 3-yr rates ]
38%
36%
34%
32%
30%
28%
26%
24%
22%
21 %
20%
18%
16%
14%
12%
11 %
11 %
10o/o +---------------------.--------------------,---------------------.---------------------.--------------------~
2004
2005
2006
22
2007
2008


ESI
coco
$16,959
$2,100
$14,443
$1 ,770
$19,059
$16,213
60%
($1 ,060)
68%
($1 ,027)
$8,792
CS.4x
$4,282
4.2X
23

J


24

The 90/1 0 rule
loans grants)
25

0
26

AND
THEN
-Grow at all costs


Utrolll\ttllb.
-e
~UonofWall
Otol!>c"'~l)

.fSe."""'lm<nls
4 S~nw>lo
1~0SJil'llf~

application ..."
4& Clll<lfln!Mit
4$41111llso~


counselor
,,01<
$7:01\611$m
S2i9\
$29\
SUk
""~
~'
~n:
)1!(
~
31:
iSZCIIIot-
l~k
S24k
$25"~
$.u t,
ua
Wl
&itfltll~
61tnr~
f38lt
SJ!llt
Qeooc~
I:J1lc
'*
8~
sm:
60 II!'Cih::r.b
oa~~
61<l~.-.-
S$EII
S$71
$341.
S3llk
&tnte..... IICI
$3!tt
$311.
~ ~,.,.,..,,.,
!<0<
$411k
Wll
541k
$.10'1.
$10
$1Cll
~~
Si.4t
~~'~
fSI
e<\QI"II~:
Ut~'
C9~"'l
1Doii!J)J11!1t!!l
~1h
$litll)f~ l1110. 0l
~
~
s.3$t.
$)ctW~~~'1
W2$C:(!( 1 ...... 01
$S3t.
l31!~
n..-
5$&0 ~~ I 1 """ 0 t
$JI;~
~
$3$11
1' n'Ollmtnlo
$ ftllt"'
m.\
UP.
~CJV1l~l$
65t4~
62~t'N~I\I;:

the DOE ... "
.,)lk
~ .qq~clb.,.ib
S..lllyOI>
$1 (f"Wol'll'Cnbt
51 cncllf!mntt
..
~lt/)'Oit
S61&pet ~ rn. O.t.
SG3l,.:r :t mo.. 0 T.
~IS P<'"
$43k
1m.
$1flt

28
'&"0 0 1'





Ms. Mary Hale Barry


Title IV Programs
Ms. Jill DeAtley


Mr. Francis Giglio


institutions!
Mr. David M. Luce

29


Timeline
---
80,000

70,000
60,000
53,688
50,000

70,000
r--
40,000
31,558
,...----
30,000
20,000

12,623
10,000
30
4,471
312
ll
Mar-05
2006
n
2007
2008
2009
2010E
Summary
IV loans and grants
government largesse
32
problematic
33

34
APQ.b
Scenario 1
Scenario 2
$4.22
$4.22
2009 EPS impact
$1.32
-69%
$2.12
-50%
$5.07
$5.07
($2.90)
($2.10)
2009 EPS impact
$2.17
-57%
$2.97
-41%
10.8
10.8
2010 Pro-forma P/E
25.4
18.5
Actual 2009 EPS

2009 EPS (adjusted)
EPS Impact
2010 EPS (adjusted)
35
Scenario 1
Scenario 2
Actual 2009 EPS

2009 EPS (adjusted)
2009 EPS impact
$7.91
($0.22}
-103%
$7.91
$2.02
-74%

EPS Impact
2010 EPS (adjusted)
2009 EPS impact
$11.05
$11.05
($8.13)
($5.89)
$2.92
-74%
$5.16
-53%
10.0 X
37.6 X
10.0
21.3
ESI

Pro-forma P/E
X
X
36
coco
Scenario 1
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact

Pro-forma P/E
Scenario 2
$0.81
$0.81
($0.76}
-194%
$0.17
$1.67
$1.67
($1.57)
($0.64)
$0.10
-94%
$1.03
-38%
9.0 X
153.5 X
9.0 X
14.6 X
-79%
37
Scenario 1
Scenario 2
$0.87
($5.50)
-732%
$0.87
($2.21}
-353%
$1.51
$1.51
($6 .37)
($3.08)
2010 EPS (adjusted)

2009 EPS impact
($4.86}
-422%
($1.57}
-204%
14.6 X
14.6 X
Pro-forma P/E
~4.5}x
~14.0~x
EDMC
Actual 2009 EPS
EPS (adjusted)
EPS impact
EPS Impact
38
WPO (Kaplan)
Scenario 1
Scenario 2
$9.78
($33.25}
-440%
$9.78
($6.19)
-163%
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact
Pro-forma P/E
39
$550 ~----------------------------------------------------------------------------------------------------------------------------------------------------~
$498
$500
$450
$423

$400
Ci)
~ $350
$358
a;
co
.3
::: $250
~
~
~
$301

the next 10 vears
-; $300
$251
$200
$150
$100
$50
$0
IPjpl i
2007
IIJI!I!I!bl i
2008
!I
2009
2010
2011
2012
2013
40
2014
2015
2016
2017
2018
2019
2020

5 COMPANY AVERAGE
~~6,811
Current vn_
$34,295
ru
$71389
S35,Q.I7
$12,84$
($3,*1
15-yr rep~~yment
$15,047
($1,18~)
20-yl' repayment
$~~
8'4 ....10
10%ra.tlo
r.wJI2
10-yr repayment
$14,807
2<%
($2,004)
-12%
15-yr repaymtnt
$17,560
-10%
-1~.
S74$
S1G,453
$2,642
1Oyr repayment
4%
O.~a
from eu~nt eo't
20yr repayment
16%
($$,09~
$30,695
($(1.800)
$33.786
1$5091
8%""'
10'.:(.ratlo
$26,21)1
~%
($4.088)
10%
$35,822
$1,526
_,.,.
$39.685
$$,390
10'fflrado
$54,~
12%
1Oyr repayment
($1&,343)
4%
1$yr repayment
$63,895
($7,494)
16%
20-yr ttpaymtnt
$70;320
($1,060)
$30,207
24'1(;
$&2,87$
(S$,510)
12%
Ill%
$74,566
$3.178
4%
1"4
$82.608
$11.21.8
16%
............. "'"'"""
b.,fl""""" ''"'""'"
,.,
..
~!Ill!
rn
1111111111111
r''"''
!!U!,!i
IIIII III' ,IJII
,..,.,
1m:
11:11
...,
.....
!Ill
....
~
I
r.m
~'I
rl!,
f''''
Lu,
''"
,,,,,
t!lllllllllll!ll
....
~
...
f "'""'"""'""'""""
"""'"'"'
"""""'
...........
IUt HIHUttt\
li
""""''~!!
1'II
Joil
Jl II
IIll
!I!~
.ji!,lll
l,('!ll
r""
Ill,Ill!
1111111'
1111!.1!!
II!II
!li ltlilllil
~"fl"'"""'
............
,...,
p!!!il
rn
1111111111111
fillill
.!tu!,t
i!illllll'
,IJII
,..,.,
1m:
!1:11
....,
i!lll
'""
'""
IJIL
r.m
~ n
~!I
f''''
1....
l.t,l,,
.1!1.!
Lt.I,
!I ,I I ~! !L~ I
'"'
~ ................ ll!lll!>ll"
L.......... ,.,.., '"'"""
r'~"'"
...........
""'
"''
"""'""
IUtHIHUttt\
L..
"""""
"""""!!!
1'
l !:i
lIll
IIll
F""
!11~1 1:!~ ;: \l ~r,i~
1..
!!I
~"fl"'"""'
............
,...,
p!!!il
rn
1111111111111
fillill
.!tu!,t
i!illllll'
,IJII
,..,.,
1m:
!1:11
....,
i!lll
'""
'""
IJIL
r.m
~ n
~!I
f''''
1....
l.t,l,,
.1!1.!
Lt.I,
!I ,I I ~! !L~ I
'"'
..........
f li'
....
''""'"'
""'
............
"""""!!! 1'
l :!I
lIll
IIll
F""
!11~1 1:!~ ;: \l ~r,i~
1..
!!I
1"'
Jill
lUI
1111
ll!lll!lili!IIH!II
.. ,o; ..
...,...
""
...............
i l !i!l!l!l~lnll
i7
.,.
!lli
P'
nr:
.Jt
I'"
~
>u
lli!,!JI!l!!lliilll
..
II
~;:
""
l l~:mililu!l l la
ll!lll!lilllllii!JI
.. ,o; ..
...,...
""
...............
i l !i!l!l!l~lnl
i7
.,.
!lli
P'
nr:
.Jt
I'"
~
>u
lli!,!JI!l!!lliilll
..
D
;;;
""
lll~:mililu!ll la
n>l l'l l l'l"! '~ ~
.:: ;;;.-.:::~
r~t-
111
~:.
~~:::-
r~t-
111
~:.
111
~~:::-
r~t-
111
~:.
111
~~:::-
r~t-
111
~:.
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
Bashford, Terry
From:
Sent:
Subject:
Attachments:
Eisman , Steven [seisman@fppartners.com]

For-profit education industry
Hello,
My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial Services fund. I wanted to
inform you that I recently spoke at the Ira Sohn conference in New York and my topic was the for-profit education
industry. My presentation was very negative and I wanted to bring to your attention many of the unsaid or unknown
aspects of this industry. We have been researching for-profit schools for over a year now and are very familiar with every
part of these businesses. Attached are the speech I gave and the presentation that was shared.
I have also attached a recent analysis we completed on the gainful employment proposal being reviewed currently. Our
purpose in the analysis is merely to raise awareness on the how critically important choosing the right metrics is to enact
the intended outcomes. Our analysis highlights how changing the key metrics (specifically the debt service % and the
repayment period) drastically affects the intended results. For example, while many schools will have to lower tuition
(resulting in lower student debt leve ls) under the proposed 8% debt service ratio and 10-yr repayment, under a 10% ratio
and a 15-yr repayment period , many schools will actually be able to raise tuition by 5% or more. Moving to a 20-yr
repayment with 10% ratio provides a much larger opportunity for nearly every school we've followed to raise tuition
substantially (in some cases by 20% or more). While I don't claim to know the Administration 's ultimate objectives, I don't
believe raising student debt levels through higher tuition is the intended outcome of the proposed regulation.
Let me be clear- the debate on gainful employment has nothing to do with "student access". It has everything to do with
revenue-per-student (and thus, profit-per-student) for these schools , and that is why the for-profit industry is fighting so
hard to loosen the metrics. I just want to ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion , if the Administration were to move substantially away from the initial combination (8% ratio
and a 10-yr repayment period), then it would be better off to have no gainful employment rule at all, since a diluted version
will likely result in no changes at the schools and no reduction in student's debt loads.
Should you have any questions on any of the information provided , I am available to discuss any of our findings or
assumptions.
Steven Eisman
917-934-1770
IRA SOHN CONFERENCE

May 26,2010
paper.
clear.
graduates.
institutions.
GOVERNMENT'S MONEY.
employee ofBPI.
their mind.
meet his quota.
securitizations.
SOLUTIONS
down.
gets cut by 38%.
cannot be cut.
mortgage industry.
the next 10 years.
rl
0
N
Disclosures
investment loss.
QJ
,........
~
ta
on
QJ
.....-4
.....-4
0
,........
,........
~
~
CI':J
QJ
on
QJ
~
~
8
~
~
,.Q
en
25% ~----------------------------------------------------------------------------------~
20%
15%
10%
5%
0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

In 1990...
were for-profit. ..
9%
~---==~~==~~~~~~
30%
8%
25%
7%
6%
20%
5%
15%
4%
3%
10'/,

*
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
S% J
I !
I I
I f
I 1 I
I i
I I
I I
I I
I I
I I
~~~~~~~~~*~~~&~~~~~~
~ ~~ ~~ ~~ ~~ ~~ f~ ~~ ~~ ~~
In 2009 ...
25% of schools are

'l
27o/o ~---------------------------------------------------------------------------------------------------------------------------------------------------------~
26%
25%
24%

23%
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
7%
1998
1999
2000
0 Pell grants
2001
2002
2003
2004

7
2005
2006
2007
2008
2009



Education and Labor
Name
Former DOE position
William Hansen
APOLLO GROUP
Jonathan Vogel
Lauren Maddox
Podesta Group
Rebecca Campoverde
Kaplan, Inc.
KAPLAN, INC
Victor F. Klatt Ill
APOLLO GROUP
Dollars in billions
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2006
2006
2007
2008
2009
Total
Total
Pell Grants
Stafford Loans
$3.5
$7.3
$8.0
$3.8
$4.5
$8.2
$4.8
$8.3
$4.9
$8.8
$5.8
$9.5
$6.2
$9.9
$5.7
$14.1
$5.5
$19.9
$5.5
$22.8
$5.8
$25.1
$6.3
$26.3
$7.2
$27.2
$7.2
$28.4
''''
''''''''
$8.0
$29.6
$10.0
$32.1
$11.6
$36.6
$12.7
$41.6
$13.1
$46.7
$12.7
$48.0
$12.8
$49.4
$14.7
$66.8
$18.2
$70.9
Pel/ Grants
quadrupled from $1
For profit
Pell Grants
$0.9
$1.0
$1.1
$1.1
$1.1
$1.2
$1.1
$0.9
$0.7
$0.7
$0.7
$0.8
For profit
Stafford Loans
$1.8
$2.1
$2.3
$1.9
$1 .5
$1 .3
$1 .0
$1.4
$2.0
$1 .9
$2.2
$2.3
$2.6
$3.0
$3.4
$4.1
$6.2
$6.6
$7.9
$8.8
$9.6
$12.4
$17.0
Total
For ~rofit
$2.7
$3.1
$34
$3.0
$2.6
$2.5
$2.1
$2.3
$2.7
$2.6
$2.9
$3.0
$3.5
For profit share

For profit share
Pell Grants
Stafford Loans
25%
25%
27%
27%
24%
28%
23%
23%
22%
17%
21%
14%
18%
10%
15%
10%
13%
10%
13%
8%
12%
9%
12%
9%
13%
10%
13%
10%
''''''''
14%
12%
13%
14%
16%
14%
16%
16%
18%
17%
19%
18%
19%
19%
.21%
22%
24%
24%

$21 billion in 2009
Year
2007
2008
2009
20 10
20 11
2012
2013
20 14
20 15
2016
2017
20 18
20 19
2020
Total
Enrollment
7%
8%
8%
9%
10%
10%
11%
12%
13%
14%
16%
17%
18%
20%
c:

Total
Pelt
Stafford
Schools
Grants
Loans
23%
19%
19%
22%
24%
21%
24%
25%
24%
25%
26%
25%
27%
27%
26%
28%
29%
27%
30%
28%
30%
31%
30%
31%
33%
32%
31%
35%
34%
32%
36%
35%
33%
38%
37%
35%
:ifWr.
39%
40%
..
40%
38%
43%

--- -11 . .\

=::::>


Non-12rofits
For-12rofits
$50.2
$12.0
$56.0
$15.5
$67.6
$21.4
$24.3
$7 1.9
$27.7
$76.5
$81 .2
$31 .5
$86.2
$35.8
$91.4
$40.8
$96.9
$46.4
$102.5
$52.8
$108.4
$60.1
$68.5
$114.4
$77.9
$120.6
$88.8 .......
$126.9

.
.
Total
Title IV
19%
22%
24%
25%
27%
28%
29%
31%
32%
34%
36%
38%
40%
42%
10
2001
2009
Other,
11 %
Apollo Group
Other,
Title IV,
48%
52%
Title IV,
89%
ITT Technical
Institute
65%
85%
11

$165
$155
$145
$135
$125
$115
$105
45% -- - - 40%
35%
30%
$95
$85
$75
$65
$55
$45
$35
$25
25%
20%
15% ~----~~----~~----~~----~~-.--.-,-~
...,o:t:::>ro "'u~ro
-- ..,u-.,.o: ...,o: "'0: ..,u-- .,.o: ...,o: "'0: ..,o: .,.u-- ...,uc "'0: ..,o: .,.o:
n
t:::>ro
...,o:
n~
coco
ESI
APOL
2007
2008
2009
$9,834,695
$8,923,79 1
$14,366,540
$4,938,982
$8,849,386
$1 1,222,377
$ 10,441,170
$26,766,979
$34,707,377
3-yr total comp
$33,125,026
$25,010,745
$71,915,526
12
Total
$25,2 14,847
$44,540,156
$60,296,294
35o/o ~------~--------------------------------------------------------~
45% ~--------------------------------------------------~
40%
37.4%
30%
29.0%
35%
25%
30%
19.8%
25%
20%
20%
15%
15%
12.1%
9.9%
10%
9.8%
10%
18.4%
9.5%
9.1%
Lockheed
Martin
Home Depot
7.4%
5%
5%
0%
0%
ITT Technical
Institute
Lockheed
Martin
Raytheon Corp
Northrup
Grumman
Boeing
ITT Technical
Institute
Apple
Computer
Procter &
Gamble

13

Total revenues
Year-year growth
Title IV revenues
Year-year growth
2007
2008
$2,724
$3,141
$417
77%
65%
$1,770
2009
$3,974
$833
89%
$2,419
$648
$3 537
( $1,119
155%
134%
2007
2008
2009
Total revenues
Year-year growth
$919
$1 ,069
$149
81 %
$1 ,308
$239
89%
$866
$174
$1,163
$297
117%
124%
Title IV revenues
Year-year g rowth
75%
$691
2007
2008
2009
Total revenues
Year-year growth
$758
$870
$112
73%
$1,015
$146
85%
$635
$157
$863
$228
141%
157%
Title IV revenues
Year-year growth
63%
$477

Dollars in millions
14
v~

IV dollars ...

instructional costs
Title IV dollars?
Lesser Means
Greater Means
-D-
-D-
(Private Colleges)

Lesser Means
-D[

15
..
Q)
"'d
0
east Saf N"wa ~

college
(AAMA)
~ ll t
!!fl
... ..

for potential jobs
By Tomas Roman


17
APOL
+ New students
2006
278,300
216,600
(212,600)
Ending enrollment
282,300
Graduation rate
Graduates
Drop outs
28%
61,390
151,210
54%
2007
282,300
258,500
(227, 100~
2008
313,700
288,200
(239,800)
2009
362,100
355,800
(274,900)
313,700
362,100
443,000
28%
72,338
154,762
52%
28%
78,484
161 ,316
48%
28%
83,440
191 ,460
48%

ESI
+ New students
2006
42,985
49,935
(46,024)
2007
46,896
54,593
(48,462)
2008
53,027
65,313
(56,357)
2009
61,983
85,928
(67,145)
Ending enrollment
46,896
53,027
61 ,983
80,766
Graduation rate
Graduates
Drop outs
44%
18,449
27,575
61%
44%
19,774
28,688
57%
44%
21 ,983
34,374
60%
44%
25,302
41 ,843
59%
........._

coco

overstated
+ New students
2006
66,114
92,185
(97,335)
2007
60,964
90,105
(89,737)
2008
61 ,332
100,210
(92,331)
2009
69,211
11 7,352
(100,475)
Ending enrollment
60,964
61,332
69,211
86,088
Graduation rate
Graduates
Drop outs
33%
20,968
76,367
120%
33%
20,179
69,558
114%
33%
21 ,540
70,791
108%
33%
25,624
74,851
96%

I


FY2008)
JC<t ~
m
2f~
1t~ 1~~
0 1931 D ii95
46_.!~:;
c 1Y,.J t995 Ji11 1S.'!l&
0 1~7 [] 19: - ~~ 20~ El:!>Jt . ::m:J

1 ~;
1t'!'i
!'"i.
c-e
;\1~
Pl.f)t~ ~!~~:
Pn>!3:e FGfDrl:m
19
Traditional vs.
Year
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
For-~rofit
Total
Enrollment
1%
2%
2%
2%
2%
2%
2%
2%
2%
2%
2%
3%
3%
3%
3%
4%
4%
5%
6%
6%
7%
8%
8%

Stafford
Total
Pell
Schools
Grants
Loans
10%
26%
26%
10%
27%
27%
24%
28%
10%
10%
23%
23%
10%
22%
17%
9%
21%
14%
9%
18%
10%
10%
9%
15%
9%
13%
10%
9%
13%
8%
15%
12%
9%
16%
12%
9%
10%
17%
13%
18%
13%
10%
19%
14%
12%
19%
14%
13%
19%
15%
14%
20%
16%
16%
17%
21%
18%
22%
19%
18%
23%
19%
19%
24%
21%
22%
26%
24%
24%
Total
Title IV
~
27%
27%
23%
19%
16%
13%
12%
11%
9%
9%
9%
10%
11%
12%
13%
14%
16%
17%
18%
19%
22%

Per Student
All schools
Non-erofit
$842
$643
$899
$670
$933
$697
$948
$740
$954
$788
$895
$1,053
$989
$1 ,120
$1,385
$1 ,246
$1,780
$1 ,616
$11,339
$1 ,827
$8,402
$1 ,967
$1 ,974
$8,910
$2,131
$2,249
$2,093
$8,317
$2,329
$2,154
$8,152
$2,323
$2,130
$8,681
$2,351
$2,139
$8,533
$2,531
$2,278
$9,349
$2,848
$2,543
$9,786
$3,146
$2,783
$9,909
$3,364
$2,947
$10,153
$3,420
$2,968
$10,498
$3,407
$2,944
$10,074
$3,740
$3,173
$10,541
$4,626
$3,744 C $13,247
20
$16,000
24%
$15,000
$14,000
r;
,;~
20%
r
r
Ill
1: $13,000
16%
Q.l
"0
0::
:I
~
~ $12,000
{)
iii
a.
12%
Q.l
.. $11,000
UJ
j::
iii
.... $10,000
l1
r-
8%
I'""
,....,
$9,000
4%
I'""
I'""
$8,000
$7,000
I I I
I 1 I
I I I
I 1 I
I I I
I 1 I
I I I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~
:
:t:
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I I I
I 1 I
I 1 I
I 1 I
I I I
I 1 I
I 1 I
~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~
~
21
I Oo/o
42o/o ~-----------------------------------------------------------------------------------------------------,
40%
40%
I -+- 2-yr rates
- - - 3-yr rates ]
38%
36%
34%
32%
30%
28%
26%
24%
22%
21 %
20%
18%
16%
14%
12%
11 %
11 %
10o/o +---------------------.--------------------,---------------------.---------------------.--------------------~
2004
2005
2006
22
2007
2008


ESI
coco
$16,959
$2,100
$14,443
$1 ,770
$19,059
$16,213
60%
($1 ,060)
68%
($1 ,027)
$8,792
CS.4x
$4,282
4.2X
23

J


24

The 90/1 0 rule
loans grants)
25

0
26

AND
THEN
-Grow at all costs


Utrolll\ttllb.
-e
~UonofWall
Otol!>c"'~l)

.fSe."""'lm<nls
4 S~nw>lo
1~0SJil'llf~

application ..."
4& Clll<lfln!Mit
4$41111llso~


counselor
,,01<
$7:01\611$m
S2i9\
$29\
SUk
""~
~'
~n:
)1!(
~
31:
iSZCIIIot-
l~k
S24k
$25"~
$.u t,
ua
Wl
&itfltll~
61tnr~
f38lt
SJ!llt
Qeooc~
I:J1lc
'*
8~
sm:
60 II!'Cih::r.b
oa~~
61<l~.-.-
S$EII
S$71
$341.
S3llk
&tnte..... IICI
$3!tt
$311.
~ ~,.,.,..,,.,
!<0<
$411k
Wll
541k
$.10'1.
$10
$1Cll
~~
Si.4t
~~'~
fSI
e<\QI"II~:
Ut~'
C9~"'l
1Doii!J)J11!1t!!l
~1h
$litll)f~ l1110. 0l
~
~
s.3$t.
$)ctW~~~'1
W2$C:(!( 1 ...... 01
$S3t.
l31!~
n..-
5$&0 ~~ I 1 """ 0 t
$JI;~
~
$3$11
1' n'Ollmtnlo
$ ftllt"'
m.\
UP.
~CJV1l~l$
65t4~
62~t'N~I\I;:

the DOE ... "
.,)lk
~ .qq~clb.,.ib
S..lllyOI>
$1 (f"Wol'll'Cnbt
51 cncllf!mntt
..
~lt/)'Oit
S61&pet ~ rn. O.t.
SG3l,.:r :t mo.. 0 T.
~IS P<'"
$43k
1m.
$1flt

28
'&"0 0 1'





Ms. Mary Hale Barry


Title IV Programs
Ms. Jill DeAtley


Mr. Francis Giglio


institutions!
Mr. David M. Luce

29


Timeline
---
80,000

70,000
60,000
53,688
50,000

70,000
r--
40,000
31,558
,...----
30,000
20,000

12,623
10,000
30
4,471
312
ll
Mar-05
2006
n
2007
2008
2009
2010E
Summary
IV loans and grants
government largesse
32
problematic
33

34
APQ.b
Scenario 1
Scenario 2
$4.22
$4.22
2009 EPS impact
$1.32
-69%
$2.12
-50%
$5.07
$5.07
($2.90)
($2.10)
2009 EPS impact
$2.17
-57%
$2.97
-41%
10.8
10.8
2010 Pro-forma P/E
25.4
18.5
Actual 2009 EPS

2009 EPS (adjusted)
EPS Impact
2010 EPS (adjusted)
35
Scenario 1
Scenario 2
Actual 2009 EPS

2009 EPS (adjusted)
2009 EPS impact
$7.91
($0.22}
-103%
$7.91
$2.02
-74%

EPS Impact
2010 EPS (adjusted)
2009 EPS impact
$11.05
$11.05
($8.13)
($5.89)
$2.92
-74%
$5.16
-53%
10.0 X
37.6 X
10.0
21.3
ESI

Pro-forma P/E
X
X
36
coco
Scenario 1
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact

Pro-forma P/E
Scenario 2
$0.81
$0.81
($0.76}
-194%
$0.17
$1.67
$1.67
($1.57)
($0.64)
$0.10
-94%
$1.03
-38%
9.0 X
153.5 X
9.0 X
14.6 X
-79%
37
Scenario 1
Scenario 2
$0.87
($5.50)
-732%
$0.87
($2.21}
-353%
$1.51
$1.51
($6 .37)
($3.08)
2010 EPS (adjusted)

2009 EPS impact
($4.86}
-422%
($1.57}
-204%
14.6 X
14.6 X
Pro-forma P/E
~4.5}x
~14.0~x
EDMC
Actual 2009 EPS
EPS (adjusted)
EPS impact
EPS Impact
38
WPO (Kaplan)
Scenario 1
Scenario 2
$9.78
($33.25}
-440%
$9.78
($6.19)
-163%
Actual 2009 EPS

EPS (adjusted)
EPS impact
EPS Impact
2010 EPS (adjusted)
2009 EPS impact
Pro-forma P/E
39
$550 ~----------------------------------------------------------------------------------------------------------------------------------------------------~
$498
$500
$450
$423

$400
Ci)
~ $350
$358
a;
co
.3
::: $250
~
~
~
$301

the next 10 vears
-; $300
$251
$200
$150
$100
$50
$0
IPjpl i
2007
IIJI!I!I!bl i
2008
!I
2009
2010
2011
2012
2013
40
2014
2015
2016
2017
2018
2019
2020

5 COMPANY AVERAGE
~~6,811
Current vn_
$34,295
ru
$71389
S35,Q.I7
$12,84$
($3,*1
15-yr rep~~yment
$15,047
($1,18~)
20-yl' repayment
$~~
8'4 ....10
10%ra.tlo
r.wJI2
10-yr repayment
$14,807
2<%
($2,004)
-12%
15-yr repaymtnt
$17,560
-10%
-1~.
S74$
S1G,453
$2,642
1Oyr repayment
4%
O.~a
from eu~nt eo't
20yr repayment
16%
($$,09~
$30,695
($(1.800)
$33.786
1$5091
8%""'
10'.:(.ratlo
$26,21)1
~%
($4.088)
10%
$35,822
$1,526
_,.,.
$39.685
$$,390
10'fflrado
$54,~
12%
1Oyr repayment
($1&,343)
4%
1$yr repayment
$63,895
($7,494)
16%
20-yr ttpaymtnt
$70;320
($1,060)
$30,207
24'1(;
$&2,87$
(S$,510)
12%
Ill%
$74,566
$3.178
4%
1"4
$82.608
$11.21.8
16%
............. "'"'"""
b.,fl""""" ''"'""'"
,.,
..
~!Ill!
rn
1111111111111
r''"''
!!U!,!i
IIIII III' ,IJII
,..,.,
1m:
11:11
...,
.....
!Ill
....
~
I
r.m
~'I
rl!,
f''''
Lu,
''"
,,,,,
t!lllllllllll!ll
....
~
...
f "'""'"""'""'""""
"""'"'"'
"""""'
...........
IUt HIHUttt\
li
""""''~!!
1'II
Joil
Jl II
IIll
!I!~
.ji!,lll
l,('!ll
r""
Ill,Ill!
1111111'
1111!.1!!
II!II
!li ltlilllil
~"fl"'"""'
............
,...,
p!!!il
rn
1111111111111
fillill
.!tu!,t
i!illllll'
,IJII
,..,.,
1m:
!1:11
....,
i!lll
'""
'""
IJIL
r.m
~ n
~!I
f''''
1....
l.t,l,,
.1!1.!
Lt.I,
!I ,I I ~! !L~ I
'"'
~ ................ ll!lll!>ll"
L.......... ,.,.., '"'"""
r'~"'"
...........
""'
"''
"""'""
IUtHIHUttt\
L..
"""""
"""""!!!
1'
l !:i
lIll
IIll
F""
!11~1 1:!~ ;: \l ~r,i~
1..
!!I
~"fl"'"""'
............
,...,
p!!!il
rn
1111111111111
fillill
.!tu!,t
i!illllll'
,IJII
,..,.,
1m:
!1:11
....,
i!lll
'""
'""
IJIL
r.m
~ n
~!I
f''''
1....
l.t,l,,
.1!1.!
Lt.I,
!I ,I I ~! !L~ I
'"'
..........
f li'
....
''""'"'
""'
............
"""""!!! 1'
l :!I
lIll
IIll
F""
!11~1 1:!~ ;: \l ~r,i~
1..
!!I
1"'
Jill
lUI
1111
ll!lll!lili!IIH!II
.. ,o; ..
...,...
""
...............
i l !i!l!l!l~lnll
i7
.,.
!lli
P'
nr:
.Jt
I'"
~
>u
lli!,!JI!l!!lliilll
..
II
~;:
""
l l~:mililu!l l la
ll!lll!lilllllii!JI
.. ,o; ..
...,...
""
...............
i l !i!l!l!l~lnl
i7
.,.
!lli
P'
nr:
.Jt
I'"
~
>u
lli!,!JI!l!!lliilll
..
D
;;;
""
lll~:mililu!ll la
n>l l'l l l'l"! '~ ~
.:: ;;;.-.:::~
r~t-
111
~:.
~~:::-
r~t-
111
~:.
111
~~:::-
r~t-
111
~:.
111
~~:::-
r~t-
111
~:.
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
11 1 {I
:1! iljl "T
'i JHriJil
u
IJl l 11Hi!h:
1 ;:flJ
111
m! mmmmi!!!i!f!!
Ill
!U
Bashford, Terry
From:
Sent:
To:
Subject:
Attachments:
Shireman , Bob
Sunday, April 04, 2010 12:07 PM
Yuan , Georgia ; Manheimer, Ann; Arsenault, Leigh
GE deck -- Confidential DELIBERATIVE PROCESS
GE 1.ppt
(b)(5)
-Bob
Robert Shireman
Deputy Undersecretary
u.s. Department of Education
(202) 260-0101
(b)(5)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(5)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(S)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(5)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(S)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(5)
Q)
>
ro
Q)
(b)(5)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(5)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(5)
(b)(5)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(5)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
Q)
()
oo
wQ:
<.9
.....J
>
a::
c..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..
(b)(S)
Q)
>
+J
ro
!.....
Q)
.0
Q) C/)
OC/)
I
I
Q)
()
oe
Wa_
<.9
.....J
>
a::
a..

Responsive Documents - CREW: Department of Education: Regarding For-Profit Education: 8/17/2011 - 11-00026-F GE Release 8.16 - Part 2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Responsive Documents - CREW: Department of Education: Regarding For-Profit Education: 8/17/2011 - 11-00026-F GE Release 8.16 - Part 2

Uploaded by

Copyright:

Available Formats

From:

From: Robert MacArthur [mail to :nnacarthur@altresearch. com]

ALTERNATIVE RESEARCH SERVICES, INC

For-Pr ofit Education Industry

http://vAvw.ifap.ed. gov/eannouncements/08061 OGainfulEmplovmentConCall.html

Robert MacArthur rmacarthurl23@comcast.net 203-244-5174 w

203-215-3843 c August 12, 2010

proposed regulation publicity

-----Original Message----From: James, Bob

Upgrade DeVry and ITT On New Gainful

312 750 3317

DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON

Sector Implications/Thesis Update

2010-2020 revenue Compound Annual Growth Rate (CAGR) of 4.9%.

2009 operating margin of 37.9% going to 39.2% by 2020.

A Weighted Average Cost of Capital (WACC) of 16%.

Terminal free cash flow growth of 3%.

2010-2020 revenue Compound Annual Growth Rate (CAGR) of 10.7%.

2009 operating margin of 19.7% going to 20.2% by 2020.

A Weighted Average Cost of Capital (WACC) of 14%.

Terminal free cash flow growth of 3%.

Companies Mentioned (Price as of 09 Apr 10)

Cl=OUiperloml: l'l=Ne<Jtrat UUndefpertorm: R Reslrcle<l; NR Not Rated: NC.Not CO<oered

Cl=OUiperloml: l'l=Ne\Jirat U:Undefpertorm: RRestri:le<l: NR Not Rated: NC.Not CO<oered

See the Companies Mentioned section for full company names.

CREDIT SUISSE SECURITIES (USA) LLC

From: Kvaal James

From: Kvaal, James

Good post. Thanks.

From: Finley, Steve

Guest Post: Gauging Gainful Employment

September 21, 2010

Yes, very interesting developments. Thanks.

From: Finley, Steve

From: Finkel Jessica

From: Woodward, Jennifer

From: Wexler, Rob

Docket ID: ED-2010-0PE-0012

Gainful Employment in a Recognized Occupation

Reference: 34 CFR 668.7, 668.13,668.90

Non-verifiable with no ability to cure

Too vague to assess the impact or effectiveness

From: Kolotos, John

From: Woodward, Jennifer

From: Wexler, Rob

Comments on Additional Programs, University of Phoenix

From: Macias, Wendy

Who needs a press release?

From: Finley, Steve

From: Siegel, Brian

Sent: Monday, June 14, 2010 9:31AM

Obama Said to Delay For-Profit College Loan Rule (Update2)

June 11, 2010, 4:36 PM EDT

Who needs a press release?

From: Finley, Steve

From: Siegel, Brian

Obama Said to Delay For-Profit College Loan Rule (Update2)

June 11, 2010, 4:36 PM EDT

Interesting. Thanks, Steve.

From: Finley, Steve

September 14, 2010

From: Sann, Ronald

From: Finley, Steve