Apollo Education Group (APOL): To Cease Enrolling Students in Programs that Fail to Satisfy Debt Service-to-Earnings Ratios, Representing 20% of Enrollment

November 25, 2016 8:18 AM EST

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Apollo Education Group (NASDAQ: APOL) disclosed that in late October 2016, the U.S. Department of Education provided to University of Phoenix, our principal Title IV disbursing higher education institution, draft gainful employment debt service-to-earnings ratios for the initial measuring year under the Department’s gainful employment regulations. The Department refers to the initial measuring year as Debt Measure Year 2015 (DMYR15). We are evaluating this information and have until December 7, 2016 to challenge the data for inaccuracies. The Department expects to issue final DMYR15 debt service-to-earnings ratios in January 2017.

Based on the draft rates, University of Phoenix programs representing approximately 16% of the University’s total degreed enrollment as of August 31, 2016 failed to satisfy either of the two minimum debt service-to-earnings ratios. Programs that fail to meet both tests for two out of three consecutive years will be ineligible to participate in Title IV student financial aid. In addition, a small number of programs neither passed nor failed and therefore are in the “zone.” Programs that are in the zone (or fail) for four consecutive years will be ineligible to participate in Title IV student financial aid. We intend to monitor these programs carefully and, where appropriate and feasible, make modifications over time to address the impact of the gainful employment regulations.

In connection with the University’s initiative to transform itself into a more focused, higher retaining and less complex institution, beginning in September 2015 and continuing through early fiscal year 2017 the University ceased enrolling new students in programs it believed may be impacted by the gainful employment regulations. As a result of these and subsequent actions, as of December 2016 the University will have ceased enrolling new students in all of the programs that failed to meet both of the minimum debt service-to-earnings ratios for DMYR15. These programs, and the other programs that were retired in connection with the broader initiative to transform the University, represented approximately 20% of the University’s total degreed enrollment as of August 31, 2016. Students who are currently enrolled in such programs are being taught-out. The University intends to provide financial and other assistance to its students who are enrolled in programs that lose eligibility to participate in Title IV student financial aid due to application of the gainful employment regulations, in order to assist the affected students to complete their programs of study. The ultimate cost of this assistance cannot be predicted currently, but could be substantial, depending on the number of students who qualify and choose to participate.

SI NOTE: APOL is currently in an agreement to be acquired by Apollo Global.

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