McFadden, Elizabeth

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Cc:
Subject:

Chesley, Susan Wednesday, August 18, 201 o 5:02 PM Kvaal, James; Kolotos, John; Finley, Steve; Kanter, Martha; Baker, Jeff; Yuan, Georgia ; Ochoa , Eduardo; Hamilton, Justin; McFadden, Elizabeth ; Sellers, Fred Bergeron, David; Madzelan , Dan RE: gainful employment Q&A

I just spoke with Andrea> our liaison with the NSLDS contractor. She has been aware of the questions from Strayer and DeVry and I requested their response on the feasibility and timing of providing the information. They did provide the logic in plain English and did some basic testing of the program when it ran to see that it did accomplish that logic . They understand the ur enc but she raised some issues llllllllllllllllllllllllllllllllllllllllllllllllll

Please let me know if you have any questions or suggestions for proceeding. -----Original Message----From: Kvaa l > James Sent: Wednesday> August 18> 2010 4:28 PM To: Kolotos> John; Finley> Steve; Kanter> Martha; Baker> Jeff; Yuan> Georgia; Ochoa> Eduardo; Hamilton> Justin; Chesl ey> Susan; McFadden> Elizabeth; Sellers, Fred Cc: Bergeron> David; Madzelan> Dan Subject: RE: gainful employment Q&A

-----Original Message----From: Kolotos, John Sent: Wednesday, August 18, 2010 7:33AM To: Kvaal, James; Finley, Steve; Kanter> Martha; Baker> Jeff; Yuan, Georgia; Ochoa, Eduardo; Hamilton, Justin; Chesl ey, Susan; McFadden, Elizabeth; Sellers, Fred Cc: Bergeron, David; Madzelan, Dan Subject: RE: gainful employment Q&A The schools want borrower-level and repayment data to confirm (or challenge) the ED calculation. In particular, they want to see how we treated consolidation loans and m ultiple loans (for a singl e borrower) that went into repayment on the same date, data about the borrowers who are in a deferment or forbearance status> and repayment data used for the
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McFadden, Elizabeth
From: Sent : Finley, Steve Monday, August 16, 201 o 1:24 PM Yuan , Georgia ; McFadden, Elizabeth; Bergeron , David ; Kvaal, James Repayment rate data -- WSJ articles and FOIA requests

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WSJ articles on the impact of the release of the repayment rate data

Dow Jones Newswires' Melissa Korn reports: A number of for-profit colleges may be in more danger than first believed of running afoul of a regulation proposed by the U.S. Department of Education that would force on them harsh penalties for graduating students with high debt loads, according to data the agency released late Friday. The department, in an attempt to show some of the rule's potential impact were it to be implemented, posted to its website late Friday a listing of the fiscal2009 loan repayment rates at more than 8,000 for-profit schools nationwide. The numbers, disputed by some institutions as being based on faulty or unclear calculations, pushed schools' shares down sharply premarket as investors weighed how it would translate to the programlevel figures on which the rule would ultimately be based. Strayer Education Inc.'s stock was off 16%. Shares of ITT Educational Services Inc. were down 9.6%, DeVry Inc. slid 7.7% and Wash ington Post- due to its important Kaplan unit - was down about 12% in early trading.

Some for-profit colleges are objecting to U.S. Department of Education data that suggest students are paying back loans at surprisingly low rates. Earlier this summer, the department proposed a rule intended to measure how well for-profit schools train students for gainful employment in a recognized occupation. Late Friday, the department issued its calculations on loan- repayment rates for more than 8,000 schools in an attempt to preview the rule's potential impact were it to be implemented. Schools could "pass" based on student loan repayment rates, or by maintaining a debt-to-income ratio below a certa in percent. The schools could face tough new regulations stripping them of access to federal funds if their students are found to have heavy debt burdens and if they don't land jobs earning enough to handle the debt. The regu lation sets a 45% repayment rate as the threshold to qualify for student aid. Some argue the department is punishing schools for having graduates enroll in loan-deferment programs that the government itself supports.
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Some of the schools are arguing their internal estimates of loan repayment rates are better than the department's findings and are expressing frustration with what they say is the agency's unwillingness to share data supporting the calculations. The rule would also apply to non-profit schools with vocational programs, though the government expects for-profit schools to bear the brunt of any penalties. "Community colleges are subject to the rule, but we don't believe that they're going to be impacted by the rule because the vast majority of community college students do not borrow," said David Bergeron, acting deputy assistant secretary for policy, planning and innovation at the Department's Office of Postsecondary Education.

Washington Post Co., whose Kaplan unit had a weighted average repayment rate of 28%, expressed concern Monday about the implications of the department's data. The company said if program-level repayment rates are similar to the data provided Friday, a significant number of Kaplan schools could become ineligible for federal student aid, which "could have a materially adverse effect on the future results of the Company's higher education division." Shares of for-profit schools sank Monday as investors digested the data, with at least two school operators hitting new 52-week lows. Strayer Education Inc. , considered among the most shielded from the proposed rule because of its large proportion of students in bachelor's and graduate degree programs and historically low loan default rate, was trading off 15% to $169.78. Corinthian Colleges Inc. was down 24.8% to $5.01 after reaching a year low of $4.94, ITT Educational Services Inc. was off 11.7% to $56.80 after hitting a new 52-week low of $54.75 and Capella Education Co. was down 16.5% to $58.60. Strayer, which late last month said it believed its programs would clear the department's highest proposed hurdle of loan repayment by 45% of graduates, scored a 25% school-wide. The company had noted last month that it was difficult to measure rates exactly because loan consolidation com icates the measure of ent.

"This discrepancy has significant operational, financial, and public policy implications," Strayer said in a statement Saturday. Capella Education also questioned the data, saying the 40% repayment rate across its schools was inconsistent with findings from an internal analysis it had conducted of its larger programs. According to that calculation, the programs would have a repayment rate above the 45% threshold. Capella said it has requested to see the Department's underlying data and methodology.

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Apollo Group Inc. shares were up 6% as the company's University of Phoenix posted a repayment rate of 44.2%, higher than most analysts expected, and Universal Technical Institute shares rose 7.4% to $15.94 as its 52% repayment rate also pleased investors.

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