SEEKING ALPHA: Could Bridgepoint Be The Next For-Profit To Fold?

Career College Central Summary:

  • Bridgepoint Education (NYSE:BPI) is one of the largest for-profit higher education institutions in the United States. It has also been alleged to violate fair marketing standards repeatedly. Like many other for-profit schools, Bridgepoint relies on questionable tactics to recruit new students. The US Department of Education has enacted new regulations which are set to take effect in July of this year. Currently, the lobbying group which represents the for-profit college industry is suing the Department of Education to block the impending changes to higher education disclosure standards. 
  • If the lawsuit is unsuccessful and the administration is able to put forth these new rules, Bridgepoint will not meet the standards. Failure to meet the required standards could result in the department pulling federal student aid – which accounts for nearly all of Bridgepoint's revenue. Corinthian Colleges (OTCPK:COCOQ) recently experienced a similar issue, which resulted in that company seeking bankruptcy protection. 
  • While in a better cash position than Corinthian, Bridgepoint faces a possibility of losing nearly all its revenue in the coming years. The company represents the ideal short: it has huge revenue risk, faces declining demand due to its sometimes unpopular practices, and is alleged to be violating a number of laws.
  • The Obama administration has fought hard to improve the standards at for-profit universities. While the Department of Education has made great strides in cleaning this industry up, there is still significant progress to be made. 
  • Recognizing that, Secretary of Education, Arne Duncan was able to implement the 90/10 rule in 2009. That law mandated that at least 10% of tuition revenues come from sources other than federal student aid (Title IV funds).

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