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Coverage Initiation: Bridgepoint Education
Value Line recently initiated coverage of Bridgepoint Education (BPI) in its flagship product, The Value Line Investment Survey. This for-profit post-secondary education company owns two regionally accredited colleges with physical locations, though the majority of its students attend via the Internet. At the end of 2011, it offered approximately 1,430 courses, 85 degree programs and 140 specializations to the over 86,000 students enrolled in its schools.
The company’s classes are offered with particular attention paid to making courses easy for working adults to attend. Moreover, credits are priced in such a manner that the tuition and fees for programs are below Title IV loan limits (see below). The company believes that this allows students that would not otherwise have the financial means to attend college courses the ability to afford Bridgepoint’s programs.
Although the price per credit varies, for the 2011-2012 academic year the price per credit was $390 for undergraduate online courses and between $510 to $926 for graduate online courses. Courses are normally three or four credits. The company’s Ashford University charges a fixed $7,860 tuition for undergraduate campus-based enrollment, allowing students to take between 12 and 18 credits per semester. For campus-based students taking more than 18 credits, the cost is an additional $458 per credit. Part time, campus-based students pay $458 per credit.
Technology is an important component of the company’s offerings, some of which it developed for its own use, and has since been adopted by other schools. Bridgepoint makes particular mention of Waypoint Outcomes, Constellation, and Thuze. These products allow for the tracking of student progress, the ability for students to get class information in one place, and provide access to class texts and readings through modern digital platforms, all with the goal of enhancing the online learning experience.
In 2005, Bridgepoint acquired The Franciscan University of the Prairies, located in Clinton, Iowa, and renamed it Ashford University. This school offers associate's, bachelor's and master's degree programs online, as well as bachelor's degree programs at its campus. Ashford University is comprised of four colleges: the College of Business and Professional Studies, the College of Education, the College of Health, Human Services and Sciences, and the College of Liberal Arts. Ashford University is regionally accredited by the Higher Learning Commission and a member of the North Central Association of Colleges and Schools. Ashford University received its most recent 10-year reaccreditation in 2006. In September 2007, the company acquired the Colorado School of Professional Psychology, located in Colorado Springs, Colorado. It was renamed University of the Rockies and offers master's and doctoral degree programs in the social and behavioral sciences. University of the Rockies is accredited by the Higher Learning Commission and received a seven-year reaccreditation in 2008. Bridgepoint itself went public in early 2009.
The company expends a material amount of time and money recruiting students and helping them through the enrollment process. These acquisition costs are an important metric for investors to monitor. Part of the acquisition process is helping students find the funds to afford attending Bridgepoint’s schools. In 2011, Ashford University derived 86.8% and the University of the Rockies 85.0% of revenues from Title IV programs administered by the U.S. Department of Education.
Students attending an institution certified as Title IV eligible by the Department of Education that also meet student eligibility standards, may receive grants and loans to fund their education under programs provided by Title IV of the Higher Education Act. Adjusting its pricing to conform to the Title IV grant and loan limits likely increases student ability to attend Bridgepoint schools, however, it makes the company highly dependent on those programs. Thus, it is important that both of the company’s schools maintain their eligibility for such loans and that Title IV loans continue to be funded at adequate levels.
In recent years there has been increased scrutiny of for-profit education facilities that has resulted in additional rules and regulations. Bridgepoint must conform to existing, new, and updated rules or both its top and bottom lines will suffer. It must also manage through the negative publicity that the industry is dealing with. Compounding these issues was a recent decision by the Western Association of Schools and Colleges to deny Ashford University’s accreditation request. Although the school remains accredited by a different regulating body, its student base is shifting in such a way that it may need to have accreditation by the Western Association. The company intends to continue its efforts while working to ensure its current accreditations.
Losing accreditation could risk the school’s eligibility for the Title IV program, which would clearly be a material issue. Thus, it is no surprise that Bridgepoint’s shares fell about 50% on the news. This is an ongoing issue that investors need to monitor closely, however, if the company is successful in its efforts, the shares could have material recovery potential. Risk averse investors, though, should await a final ruling.
Subscribers interested in taking a position in a for-profit education company with material recovery potential should consult the regular quarterly reports for Bridgepoint Education to keep up on the accreditation issue. Note, that material news on this and other topics will be highlighted in supplemental reports as the news occurs.
At the time of this articles writing, the author did not have positions in any of the companies mentioned.