Must Reads: 03/05/10

Bloomberg article on for-profit acquisitions of non-profit institutions and their regional accreditation status.

Buying accreditation lets the new owners benefit immediately from federal student aid, which provides more than 80 percent of revenue for some for-profit colleges, instead of having to wait at least two years. Traditional colleges are also more inclined to offer transfer credits for courses taken at regionally approved institutions, making it easier to attract students nationwide.

More vigilance by the Education Department and accrediting groups is likely to slow enrollment growth and the share prices of higher education companies that rely on acquisitions, said Clifford. While publicly held postsecondary education companies rose 29.9 percent in the 12 months ended March 3, they lagged behind the S&P 500, which increased 60.7 percent over the same period, said Jeffrey Silber, an analyst for BMO Capital Markets in New York. The shortfall reflected investors’ fears of tighter federal regulation of for-profit colleges, Silber said.

Regional accreditation is worth $10 million to a for-profit acquirer, Clifford said in a telephone interview. That’s how much it would cost to start a regionally accredited college, a process that can take 10 years and has only a 50-50 chance of success, he said. On top of the $10 million, buyers typically pay $23,000 to $50,000 per enrolled student, making the purchase of Daniel Webster a bargain, Clifford said.

“As a for-profit venture, we have the resources to invest in the student experience and the very best faculty, and we want to provide a high quality business education.”(Jack Welch)

Michael Platt at Career College Central

As with the automotive industry, this administration keeps throwing money we don’t have at failing businesses like the community college system, and trying to fix the problems by charging the taxpayers more money, in this case through increased tuition. And let’s be fair here ... our government owns and run these businesses. There is no other reasonable way to look at it.