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For-profit education stocks got walloped today (March 4) after Senate Democrats proposed a bill that would strengthen the Department of Education's oversight of these controversial entities. According to Yahoo, the legislation would require the department to conduct reviews of colleges that spend more than 20% of revenues on recruiting and get more than 85% of revenue from from federal student aid programs. Bridgepoint Education dropped 3.43% to to $9.87. Strayer Education dropped 4.11% and Career Education 9.33%. Bridgepoint is notorious because it spends more on recruitment than it does on education; it gets more than 90% of its funds from the federal government, including the military.

Senate investigating committees, the Department of Education, and scholars in the education field basically say Bridgepoint is ripping off students and U.S. taxpayers. I have been writing for years that it is a completely unethical operation. But Wall Street is amorality incarnate. A stock of an opium den, brothel, snuff-film maker, Murder Incorporated would rise if the numbers looked enticing. Bridgepoint is priced for liquidation. The company has no debt, a 21.3% return on assets, 32.67% return on equity, $334.6 million in cash, and the stock sells for merely 4.1 times its latest 12-month earnings. But two different accrediting organizations eye Bridgepoint's major operation (Ashford University) warily, and the Justice Department and Department of Education are probing it. The question is whether the government would have the guts to close it down, or the accrediting agencies would thumb it down, essentially snuffing it out. If the past is pertinent, Bridgepoint will get a bit more than a wrist slap. The feared legislation is not likely to pass; Republicans claim they are watchdogs of the public purse but look the other way when for-profit education companies pilfer federal funds. At some point, the stock of this dubious company could explode to the upside as it has before, even though the tremendous earnings momentum is likely to reverse in coming quarters.

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Comments

Visduh March 4, 2013 @ 2:08 p.m.

There is every possibility that this legal scam can continue. Unless the federal government massively rewrites the rules for student loans and the terms under which they are given, Bridgepoint will be able to tweak its operation and meet the bare minima of revised requirements and stay in the good graces of the Dept of Education. A better outcome for all involved would be for the public to get smart about this overpriced and underdelivered caricature of education, and turn its back on Bridgepoint and its colleges. That would be far better than any sort of political change. But there are just too many folks out there who find the usual process of applying to a college or university daunting and out of reach. And as long as there are slick-talking recruiters, they'll convince these unfortunates to go into debt and try for some sort of bogus studies. That's the sad part.

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Don Bauder March 4, 2013 @ 2:48 p.m.

Visduh: Once again, you hit the nail on the head. The ideal liquidation of this company would be a result of students realizing they have been had. With two-thirds of students dropping out of some categories of Bridgepoint programs, a flood of lawsuits should have already been filed. I fear that regulators will come forth, once again, with pusillanimous actions that will be a cue to Wall Street to run this stock up again. Best, Don Bauder

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Psycholizard March 4, 2013 @ 4:08 p.m.

Our excellent adult education programs should be given some fraction of Bridgepoint's advertising budget to market themselves. Bridgepoint may be raiding the public purse, but not on the level of defense and oil etc.. The greater scandal is the failing students seduced by ads on daytime work hour TV away from training they could complete, into a bizarre scheme to plunder the treasury and investors, Everyone can't complete college, but everyone can learn if they have desire and help. The Bridgepoint cheat concerns more than money.

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Visduh March 4, 2013 @ 5:10 p.m.

Locally and across the nation, the community colleges and state universities don't do much of a job of marketing themselves, and fail to reach many potential students. Those are people who stand on the sidelines waiting for a special invitation that never comes from the traditional sources of a college education. Here in SD County, the two-year colleges should be reaching out more than they do, and the two CSU campuses could also do much more to interest those who could consider attending. The relative cost of attending those schools is so much lower than anything the for-profits offer, and is obviously worth far more. And you are right, when Bridgepoint fails to deliver, it has effects on the students that are far more severe than mere dollars and cents. They may decide that they are undeserving of education, or incapable of learning when nothing could be farther from the truth.

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Don Bauder March 4, 2013 @ 7:33 p.m.

Visduh: In their high-pressure sales pitches, Bridgepoint and other for-profits tell potential students that their degrees will get them good jobs. But that seldom happens. Best, Don Bauder

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Don Bauder March 4, 2013 @ 7:30 p.m.

Psycholizard: All of our country's egregious education failures -- particularly the escalation of the cost of higher learning, and the concomitant student debt bubble -- involve more than money. They involve our nation's future. Best, Don Bauder

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Twister March 5, 2013 @ 9:23 a.m.

Please see the link I supplied at http://www.sandiegoreader.com/weblogs... and Don's comment.

Since the "country's egregious education failures . . . involve our nation's future," what should be our strategy in moving it in a better direction?

Colleges and Universities should have charters--someone could work on providing a Word file on them. If there were enough people willing to devote just a little time to do this for one institution, then they could be assembled in one place and shared.

A chart could be prepared that would illustrate the standards and objectives of the charters and group them according to their similarities--what they have in common, and which ones were outliers. Do "land-grant" institutions group well? Outliers, should then stand out from the herd, such as those with honest scholarship programs and other student-support rather than student enslavement-to-debt-for-life de jure or de facto policies, consistent or inconsistent with their own charters. Nail down hypocrisy, such as blather about "the success of our students being our primary concern" that is contrary to the evidence.

That is, a project like this, given a disciplinary framework, could then develop a comprehensive study that is backed up with specifics rather than opinion and generalities without foundation or with the foundations hidden from the reader. That is, we could put our collective muscle where our "mouths" are and actually get something done.

Don needs help. We can all start a "tree" where we disseminate information to our friends, thus increasing effective "circulation" and increasing eyeballs for the Reader.

I have restrained myself from going into more detail to keep this short, and I want to encourage others to contribute their own ideas. I will mention in closing, however, that this might be taken up by one or more professors and their students--is that irony, or what?

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Don Bauder March 5, 2013 @ 12:53 p.m.

Twister: "Success of our students" should not be a university's primary concern. The purpose of an institution of higher education is to cram the student's head full of knowledge, teach him/her how to acquire knowledge, and give him/her a thirst for knowledge. Whether a graduate succeeds later in life is important, but not primary. Best, Don Bauder

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Twister March 8, 2013 @ 10:38 p.m.

I agree that "success of our students" should not be a university's primary concern, nor should it be the student's concern, as in "preparing for the job market." But beyond knowledge lies UNDERSTANDING, which that magical moment when everything comes together, a "breaking through."

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Psycholizard March 5, 2013 @ 2:03 p.m.

The deception in the sales pitch, for the schools and the loans to pay for them, are the real scandal. Some are helped by these for profits, but they pitch themselves to students they can't help. I suspect our local young veterans might be part of the reason so many for profit schools are located here. We should get the word out to those leaving the Navy and Marines locally of the many education choices available to those with the GI Bill, along with warnings, like the article, of the dodgy nature of some for profit schools.

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Don Bauder March 5, 2013 @ 6:10 p.m.

Psycholizard: There are some government jobs -- say in firefighting -- in which a college degree automatically brings an increase in pay grade. Someone can get a degree from a third- or fourth-rate for-profit and get higher pay. However, these for-profits are very expensive. Best, Don Bauder

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Psycholizard March 5, 2013 @ 6:50 p.m.

For some the price is secondary. If these schools made their money from wealthy parents, and grateful alumni there would be no problem, but too much comes from federal money diverted from more worthy colleges, with the usual quasi bribery of Congress and regulators.

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Don Bauder March 6, 2013 @ 7:06 a.m.

Psycholizard: Pell grants and similar programs must be reformed. But as long as Republicans stick by the for-profits, despite their tapping of the public till, it may not happen -- until the bubble bursts. Best, Don Bauder

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Twister March 9, 2013 @ 8:25 p.m.

The next bubble that bursts--when and how big? How much bigger than the "last" one?

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