The document discusses concerns around proposed "gainful employment" regulations for the for-profit education sector from the U.S. Department of Education. It summarizes that the original estimates from the Department significantly underestimated the negative impacts, including that 30% of students could be at institutions deemed ineligible, and up to 500,000 students may not complete their education. It also estimates that the regulations could cost taxpayers $5.3 billion annually, far more than the $2 billion in defaulted loans the regulations aim to protect.
Web & Social Media Analytics Previous Year Question Paper.pdf
2010 PLS Career Summit: Seth Reynolds, Parthenon Group
1. Pearson Learning Solutions Summit T HE PARTHENON G ROUP
Boston • London • Mumbai • San Francisco
Student Value Proposition and Gainful Employment
December 2010
2. For-profit education is under attack from
all sides! T HE P ARTHENON G ROUP
• CDR
• Gainful employment
• Incentive
compensation
$26B U.S.
For-profit • “Sub-prime goes to college”
PSE • The next big short
• Public sector competence
• Commoditization of online
2
3. The Good News
Despite what is in the press, the sector’s underlying
value proposition is strong… T HE P ARTHENON G ROUP
Funding Per Positive Dollar Gain in Annual
Student Outcomes 5 Years
Outcome Income
Post-Enrollment
(2-Years and Less (2-Years and Less
(2-Years and Less Institutions, 2001)
Institutions, 2007) Institutions, ‘02-’05)
100% $30K $30K
Still Enrolled
$27.6K
$26.7K
Dropped $25.3K Other
out Other Income
80% Dropped Gain 7.3 $22.5K
out
Federal
$20K Funding $20K
Transferred Income
60% Gain 7.9
State/Local
Funding
Transferred
40%
Pre-enrollment
Certificate $10K $10K Income 20.3
Tuition and
Fees Pre-enrollment
Certificate Federal Income 14.7
20% Funding
Tuition and
Associate
Associate Fees
0% $0K $0K
Public Private Sector Public Private Sector Public Private Sector
Note: * Graduation Rate = grads / (grads+ dropouts); Positive Outcomes = (grads + transfers) / (grads + transfers + drops)
Source: NCES BPS 1996-2001; Parthenon Analysis 3
4. The Good News
…And, there is a long term need for private sector
education as they are driving expanded access T HE P ARTHENON G ROUP
Low-Income Student Non-White Student Age 25 and Over Student
Enrollment Growth, 2004-08 Enrollment Growth, 2003-07 Enrollment Growth, 2003-07
20% 20% 20%
17%
15% 15% 14% 15%
CAGR („03-‟07)
CAGR („03-‟07)
CAGR („04-‟08)
13%
Age 25
10% 10% 10% and Over
Non-white Enrollment
Low-income CAGR
Enrollment
Enrollment ('03-'07)
CAGR CAGR
5% ('04-'08) 5% ('03-'07) 5%
3%
0% 0% 0%
-1%
-2%
-5% -5% -5%
Public Sector Private Sector Public Sector Private Sector Public Sector Private Sector
Note: The upper limit of the lowest quintile was $18,500 in 2004 and $20,712 in 2008.
Source: IPEDS 2003 & 2007; NPSAS 2004 & 2008; U.S. Census Bureau 4
5. The Not-So-Good News
Proposed ‘gainful employment’ regulation
summary of impact estimates T HE P ARTHENON G ROUP
Revised Estimate After
Original ED Estimate Incorporating Proposed
Methodological Adjustments
Subject to GE Subject to GE
All Schools All Schools
Regulation Regulation
% of Students
4% 14% 16% 30%
9% 31% 5% 26%
37% 51% 31% 33%
49% 5% 48% 11%
Ineligible Restricted Eligible w/ Disclosure Eligible
Source: United States Department of Education Missouri Gainful Employment Analysis; BLS; US Census Bureau; BPS; NPSAS; Parthenon Analysis 5
6. The Not-So-Good News
Proposed ‘gainful employment’ regulation
student transfer assumptions T HE P ARTHENON G ROUP
U.S. ED Transfer Assumptions Adjusted Transfer Assumptions
307,000 1,000,000
100% 100%
Switch Programs
Not relevant after the first year at Same School
Complete Program
80 80
Switch Institutions
60 60 within Sector
Switch Programs at
Same School Switch Sectors
30% of these programs fail GE
40 40
Switch Institutions
within Sector Leave Postsecondary
20 20 Education
Switch Sectors Already budget and
capacity constrained
Leave Postsecondary
Education 0
0
ED Transfer Assumptions Adjusted Transfer Assumptions
Adjusted assumptions imply that 300,000 - 500,000 students will likely
not complete post-secondary education
Source: U.S. Department of Education NPRM 6
7. GE regulations seek to protect $2B in defaulted
federal loans annually; GE implementation will cost
taxpayers $5.3B annually T HE P ARTHENON G ROUP
Cost to Taxpayer of Proposed Gainful Employment Regulations
vs. Current Estimate of Total Defaulted Loans
$6B
$5.3B
Lost Productivity of Students
For-Profit Students
4 Transfer to Another
Sector
$2.0B
2
Total Job Losses
Defaulted Loans
0
Current Estimate of Total Cost to Taxpayer of
Defaulted Loans Gainful Employment
Note: Assumes 10-year repayment window and 6.8% fixed interest rate for unsubsidized loans and a 6.0% interest rate for subsidized loans; cash flows are not discounted;
loans in default are recovered at the rate of ~20% per year for four years, according to the Student Aid Administration FY10 Budget page 38
Source: College Board, US ED Federal Student Aid Budget Lifetime Default Rates; Student Aid Administration FY10 Budget; US ED Federal Student Aid Annual
Report 2009; Department of Education NPRM; NCES IPEDS database; NCES BPS 1996-2001; company financials and SEC filings; BLS; BEA; CBO 7