GO
Loading...

For-Profit Schools Dazed by Data

This is as bizarre as it gets: The Education Department Tuesday released so-called “Gainful Employment” data that ultimately determines whether the schools should qualify for aid.

Dave Bradley Photography | Getty Images

At least two companies have said the data is inaccurate — and (the bizarre part!) not in their favor.

Both Education Management, which operates a chain of art institutes, and Capella Education said in SEC filings the debt levels reported by the Ed Department are too low.

While the data was disclosed to the public Tuesday, it was released to the schools last Friday. It included such metrics as student debt-to-earnings levels and repayment rates.

According to Capella’s 8-K filing: “There is an error in the (student) debt data that the Department used to calculate Capella University's debt-to-discretionary income and debt-to-annual earnings ratios. The error is producing more favorable debt-to-earnings metrics than we had anticipated.”

Education Management , whose stock has fallen more than 70 percent so far this year, said something similar: “The Company believes that conclusions drawn from the informational data may be misleading.”

Both companies say they have contacted the Education Department, which has not yet responded to my inquiry.

What’s the upshot? It’s unclear, especially if the department releases modified data at some point.

But longtime industry critic Brad Safalow of PAA Research says he believes “the debt numbers across the board are just absurd. If they were right, the industry would generate 40 percent of revenues from federal financial aid, not 80-90 percent.

"It's funny that the stocks of the companies that have raised caution about the integrity of the data are not up as much, but the Strayer , ITT Education and DeVry’s of the world roll along.”

Safalow adds that he believes the Ed Department “was very worried about releasing a data set that showed a huge number of programs out of compliance due to the legal risk. There's no enforcement with this data, so why not massage it so that it appears to be relatively innocuous.”

My take: This is a delicate and highly nuanced battle between the industry and the Ed Department, as the industry continues to work overtime trying to knock down the already watered down Gainful Employment regulations — in hopes that a new administration will kill it altogether.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

Follow Herb on Twitter: @herbgreenberg

Find Herb on Google+

Subscribe to Herb athttp://www.facebook.com/herb.greenberg

Disclaimer

Symbol
Price
 
Change
%Change
CPLA
---
DV
---
EDMC
---
ESI
---
STRA
---
APOL
---

Featured

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Senior Commodities Correspondent and Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.