THE PARTHENON GROUPBoston • London • Mumbai • San Francisco
Student Value Proposition and Gainful Employment
Pearson Learning Solutions Summit
December 2010
THE PARTHENON GROUP
2
For-profit education is under attack from
all sides!
• CDR
• Gainful employment
• Incentive
compensation
• Public sector competence
• Commoditization of online
• “Sub-prime goes to college”
• The next big short
$26B U.S.
For-profit
PSE
THE PARTHENON GROUP
3
0%
20%
40%
60%
80%
100%
Public
Still Enrolled
Droppedout
Transferred
Certificate
Associate
Private Sector
Droppedout
Transferred
Certificate
Associate
The Good News
Despite what is in the press, the sector’s underlying
value proposition is strong…
Student Outcomes 5 Years
Post-Enrollment
(2-Years and Less Institutions, 2001)
$0K
$10K
$20K
$30K
Public
Other
State/LocalFunding
FederalFunding
Tuition andFees
$25.3K
Private Sector
Other
FederalFunding
Tuition andFees
$26.7K
$0K
$10K
$20K
$30K
Public
IncomeGain 7.3
Pre-enrollmentIncome 20.3
$27.6K
Private Sector
IncomeGain 7.9
Pre-enrollmentIncome 14.7
$22.5K
Dollar Gain in Annual
Income
(2-Years and Less
Institutions, ‘02-’05)
Funding Per Positive
Outcome
(2-Years and Less
Institutions, 2007)
Note: * Graduation Rate = grads / (grads+ dropouts); Positive Outcomes = (grads + transfers) / (grads + transfers + drops)
Source: NCES BPS 1996-2001; Parthenon Analysis
THE PARTHENON GROUP
4
-5%
0%
5%
10%
15%
20%
Public Sector
-2%
Private Sector
Low-incomeEnrollment
CAGR('04-'08)
13%
The Good News
…And, there is a long term need for private sector
education as they are driving expanded access
Low-Income Student
Enrollment Growth, 2004-08
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
-5%
0%
5%
10%
15%
20%
Public Sector
3%
Private Sector
Non-whiteEnrollment
CAGR('03-'07)
14%
Non-White Student
Enrollment Growth, 2003-07
-5%
0%
5%
10%
15%
20%
Public Sector
-1%
Private Sector
Age 25and Over
EnrollmentCAGR
('03-'07)
17%
Age 25 and Over Student
Enrollment Growth, 2003-07
CA
GR
(„0
4-‟0
8)
CA
GR
(„0
3-‟07)
CA
GR
(„0
3-‟0
7)
THE PARTHENON GROUP
5
The Not-So-Good News
Proposed ‘gainful employment’ regulation
summary of impact estimates
Ineligible Restricted Eligible w/ Disclosure Eligible
Source: United States Department of Education Missouri Gainful Employment Analysis; BLS; US Census Bureau; BPS; NPSAS; Parthenon Analysis
Original ED Estimate
% o
f S
tud
en
ts
All SchoolsSubject to GE
Regulation
4% 14%
9% 31%
37% 51%
49% 5%
Revised Estimate After
Incorporating Proposed
Methodological Adjustments
All SchoolsSubject to GE
Regulation
16% 30%
5% 26%
31% 33%
48% 11%
THE PARTHENON GROUP
6
Not relevant after the first year
Already budget and
capacity constrained
0
20
40
60
80
100%
ED Transfer Assumptions
Switch Sectors
Leave Postsecondary Education
Switch Institutionswithin Sector
Complete Program
Switch Programs atSame School
307,000
0
20
40
60
80
100%
Adjusted Transfer Assumptions
Switch Sectors
Leave Postsecondary Education
Switch Programs at Same School
Switch Institutions within Sector
1,000,000
The Not-So-Good News
Proposed ‘gainful employment’ regulation
student transfer assumptions
U.S. ED Transfer Assumptions
Source: U.S. Department of Education NPRM
Adjusted Transfer Assumptions
30% of these programs fail GE
Adjusted assumptions imply that 300,000 - 500,000 students will likely
not complete post-secondary education
THE PARTHENON GROUP
7
0
2
4
$6B
Current Estimate of TotalDefaulted Loans
Defaulted Loans
$2.0B
Cost to Taxpayer of Gainful Employment
Total Job Losses
For-Profit StudentsTransfer to Another
Sector
Lost Productivity of Students
$5.3B
GE regulations seek to protect $2B in defaulted
federal loans annually; GE implementation will cost
taxpayers $5.3B annually
Cost to Taxpayer of Proposed Gainful Employment Regulations
vs. Current Estimate of Total Defaulted Loans
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
Top Related