Bergeron, David

From: Lorena L1ivichuzca [lorena@millrockllc.com]

Sent: Tuesday, May 04, 2010 4:07 PM
To: Duncan, Arne
Cc: peter.cunniingham@ed.gov; Bergeron, David; Sorensen, Howard; Aspling, David; Tighe,
Kathleen S.; Shireman, Bob
Subject: Letter to Secretary Duncan from the Alliance for Economic Stability, Inc.
Attachments: Letter to Secretary Duncan 05-04-10.pdf

Dear secretary Duncan,

Please find attached a letter from the Alliance for Economic Stability, Inc. regarding Bridgepoint Education, Inc.

Lorena M. L1ivichuzca
747 Third Avenue, 25th Floor
New York, NY 10017
. Tel. (212) 702-8805
Fax (212) 918-3465
Email: lorena@millrockllc.com

. This message is for the intended recipient's use only. It is not to be retransmitted without the express written consent of the sender. This e-,mail may
contain confidential, proprietary or legally privileged information. If you receive this message in error, please immediately delete it and notify the sender.
You must not, directly or indirectly. use, disclose, distribute. print. or copy any part of this message if you are not the intended recipient.

Copies of written communications (including e-mails) may be kept and archived indefinitely. This may include this e-mail, and any a-mail reply made to it.

35
Bergeron, David

From: Lorena L1ivichuzca [Iorena@millrockllc.com]

Sent: Monday, May 17,20106:33 PM
To: Duncan, Arne
Cc: Rogers, Margot; Rose, Charlie; Shireman, Bob; Ceja, A1ejandra; Tighe, Kathleen S.; West,
Keith; Erceg, Marta; Hamel, William; Roberts, Jim; Sorensen, Howard; Aspling, David; William
Taggart; Minor, Robin; Madzelan, Dan; Bergeron, David
SUbject: Letter to The Honorable Arne Duncan from the Alliance for Economic Stability, Inc.
Attachments: Letter to Secretary Duncan 05-17-10. pdf

Dear Secretary Duncan,

Attached please find a letter from the Alliance for Economic Stability, Inc. Thank you.

Lorena M. L1ivichu2ca
747 Third Avenue, 25th Floor
New York, NY 10017
Tel. (212) 702-8805
Fax (212) 918-3465
Email: lorena@millrockllc.com

This message is for the intended recipient's use only. It is not to be retransmitted without the express written consent of the sender. This e-mail may
contain confidential, proprietary or legally privileged information. If you receive this message in error, please immediately delete it and notify the -sender.
You must not, directly or indirectly, use, disclose, distribute. print, or copy any part of this message if you are not the intended recipient.

Caples of vvritten communications-(induding e-mails) may be kept and archived indefinitely. This may include this e-mail, and any e-mail reply made to it.

27
Bergeron, David

From: Lorena L1ivichuzca porena@millrockllc.com]

Sent: Thursday, May 20,201012:43 PM
To: Minor, Robin
Cc: Duncan, Arne; Rogers, Margot; Rose, Charlie; Shireman, Bob; Ceja, Alejandra; Tighe,
Kathleen S.; West, Keith; Erceg, Marta; Hamel, William; Roberts, Jim; Sorensen, Howard;
Aspling, David; William Taggart; Madzelan, Dan; Bergeron, David; Mayes, Edgar
Subject: Letter to Robin Minor, Acting Chief Compliance Office
Attachments: Letter to Robin Minor 05-20-10.pdf

Dear Ms. Minor,

Attached please find a letter from the Alliance for Economic Stability, Inc.

Lorena M. L1ivichuzca
747 Third Avenue, 25th Floor
New York, NY 10017
Tel. (212) 702-8805
Fax (212) 918-3465
Email: lorena@millrockllc.com

This message is for the intended recipient's use only. It is not to be retransmitted without the express written consent of the sender. This e-mail may
contain confidential, proprietary or legally privileged information. If you receive this message in error, please immediately delete it and notify the sender.
You must not, directly or indirectly, use, disdose, distribute, print, or copy any part of this message if you are not the intended recipient.

Copies of written communications (including e-mails) may be kept and archived indefinitely. This may include this e-mail, and any e-mail reply made to it.

25
 Bergeron, David

From: Nassirian, Barmak [NassirianB@aacrao.org]

Sent: Monday, June 22. 2009 11 :15 AM
. To: Macias, Wendy
Cc: Shireman, Bob; Madzelan, Dan; Bergeron, David
Subject: AACRAO Comments on Program Integrity
Attachments: AACRAO Statement on Program Integrity.pdf

Wendy,

Enclosed please find AACRAO's written submission in response to the Department's notice.

Regards,

Barmak

Barmak Nassirian
AACRAO
2021 263-0290 direct
2021 872,.8857 fax

154
Bergeron. David

From: Colon Garcia, Cristina [Cristina.Colon@morganstanley.com]

Sent: Friday, June 26, 2009 1:35 PM
To: Bergeron, David
Subject: Notes from written comments
Attachments: June09 NegReg Written Submissions Write-Up.doc

Hi David,

Thank you for receiving me earlier this week and allowing me to take my time reading through the written submissions. It
was good learning experience for me. Attached here is my summary write-up of all the notes I have from that day. I hope
you and your colleagues can get some use out of it.
Look forward to seeing everyone again in the Fall, and thanks again!

Best,
Cristina

Cristina Colon Garcia

Morgan Stanley I Research
1585 Broadway, 34th Floor I New York, NY 10036
Phone: +1 212761-4453
Cristina.Colon@morqanstanley.com

This is riot an offer (or solicitation of an offer) to buy/sell the securities/instruments mentioned. Morgan Stanley may deal as principal in or own or act
as market maker to securities/instruments mentioned or may advise the issuers. This may refer to a research analyst/research report. For additional
InformatiDn, research reports and important disclosures, contact me Dr see httos:/lsecure.ms.cQm. We do not represent this Is accurate or complete
and we may not update this. Past performance is not indicative of future returns. This communication is solely for the addressee(s) and may contain
confidential Information. We dQ nQt waive confidentiality by mistransmlssiQn. CQntact me if you dQ nQt wish tQ receive these co.mmunications. This
communication is directed in the UK to thQse persQns whQ are professiQnal and eligible counterpartles (as defined in the UK Financial Services
AuthQrity's rules). MQrgan Stanley may mQnitQr and store emails to the extent permitted by applicable law.

152
Bergeron. David

From: Shireman, Bob

Sent: Friday, February 05. 2010 11:56 AM
To: Manheimer. Ann
Cc: Bergeron, David
Subject: FW: Height Analytics ~- For-Profit Ed: Gainful Employment Means Higher Wages &
Lower Tuition
Attachments: Gainful Employment Analysis-Round 3.xlsx

Rich data.

From: Nassirian, Barmak [mailto:bannak@aaaao.org]

sent: Friday, Febl"uary 05, 2010 11:44 AM
To: Pauline Abernathy
Cc: Deanne loonln; Swarthout. luke (HELP Committee); Shireman, Bob; Burd@newamerica.net;
James_R._Kvaal@who.eop.gov; Lauren Asher; Luke Klipp; nassilianb@aacrao.orgi Dannenberg, Michael; Arsenault, leigh
Subject: Re: Height Analytk:s - For·Profit Ed: Gainful Employment Means Higher Wages & Lower Tuition

From Credit Suisse. Very interesting analysis oflikely impact on specific companies.

On Wed, Feb 3, 2010 at 10:36 AM, Pauline Abernathy <pabcmathy@ticas.org>wrote:

To help with scheduling. please indicate whieh of the five specified
dates and times you can make at hltp:/Iwww.doodle.com/vvefr6qm3mgx4ukn.
It is quick, painless and does not require registration. Thanks

-----Origjnal Messagc-----
From: Deanne Loonin [maiIto:dloonin@nclc.orgl
Sent: Wednesday. February 03, 201010:22 AM
To: Pauline Abernathy; Swarthout, Luke (HELP Committee);
Bob.Shireman@ed.gov; Burd@newamcrica.net; Jame...;; R. Kvaal@who.eop.gov;
Lauren Asher; Luke Klipp; nassirianb@aacrao.org
Cc: Michael.Dannenberg@ed.gov; Leigh.Arsenault@ed.gov
Subject: RE: Height Analytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

I'm seeing clients most of the day on Fri., but if thaL's the only day
that works, I can do 1-2 ET, but not 2-3. I'm also free all day Monday
if that works better for others as it docs for me.

-----Original Messagc-----
From: Pauline Abernathy [mailto:pabernathY@ticas.orgl
Sent: Wednesday. February 03. 2010 10:12 AM
To: Swarthout, Luke (HELP Committee); Bob.Shireman@ed.gov; Deanne
Loonin; Burd@newamerica.net; James R. Kvaal@who.eop.gov; Lauren Asher;
Luke Klipp; nassirianb@aacrao.org
Cc: Michael.Dannenberg@ed.gov; Leigh.Arsenault@cd.goY
Subject: RE: I-Ieight Analyties -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

Can folks do this call at l pm this Friday? Seeood choice 2 pm? !fwe
103
get a quorum I can send around a conference call number.

-----Original Message-----
From: Swarthout, Luke (HELP Committee)
[mailto: Luke Swarthout@help.senate.gov]
Sent: Wednesday, February 03,20107:58 Ai'v1
To: 'Bob.Shireman@ed.gov'; Pauline Abernathy; 'dloonin@nclc.org';
'Burd@)!ewamerica.net'; 'James R. Kvaal@who.eop.gov'; Lauren Asher; Luke
Klipp; 'nassirianb@aacrao.org'
Cc: 'Michae1.Dannenberg@ed.gov'; 'Leigh.Arsenault@ed.gov'
Subject: Re: Height Analytics --For-Profit Ed: Gainful Employment Means
Higher \Vages & Lower Tuition

I would like to call in as well.

----- Original Message -----

From: Shireman, Bob <Bob.Shireman@ed.gov>
To: Pauline Abernathy <pabernathy@ticas.org>; Deanne Loonin
.<dloonin@nclc.org>; burd@newamerica.net <buid@newamerica.net>;
James R. Kvaal@who.eop.gov<James R. Kvaal@who.eop.gov>; Lauren Asher
<LAsher@ticas.org>; Luke Klipp <lklipp@ticas.org>; Swarthout, Luke (HELP
Committee); nassirianb@aacrao.org <nassirianb@aacrao.org>
Cc: Dannenberg, Michael <Michael.Dannenberg@ed.gov>; Arsenault, Leigh
<Leigh.Arsenault@ed.gov> .
Sent: Wed Feb 0307:06:092010
Subject: RE: Height Analytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

If I'm available when you have your call I'd like to listen in.
Dannenberg has now joined us too and might be available.

From: Pauline Abernathy [pabemathy@ticas.org]

Sent: Tuesday, February 02,20102:50 PM
To: Deanne Loonin; Shireman, Bob; burd@newamerica.net;
James R. Kvaal@who.eop.gov; Lauren Asher; Luke Klipp;
luke swarthout@help.senate.gov; nassirianb@aacrao.org
SubjeCt: RE: HeightAnalytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

Luke, James and Bob: do you want to be part of a for-profit call, or

should we schedule a neg reg follow-up conference call without you?

From: Deanne Loonin [mailto:dloonin@nc1c.org]

Sent: Tuesday, February 02, 2010 2:43 PM
To: Pauline Abernathy; bob.shireman@ed.gov; burd@newamerica.net;
James R. Kvaal@who.eop.gov; Lauren Asher; Luke Klipp;
luke swarthout@help.senate.gov;nassirianb@aacrao.org
Subject: RE: Height Analytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

104
 Thanks Pauline for circulating. Can we set up a strategy session
(follow-up from neg. reg.) at some point relatively soon? The responses
so far I have seen from the industry, while not surprising, show how
hard they will be fighting this.

From: Pauline Abernathy [maiIto:pabemathy@ticas.org]

Sent: Tuesday, February 02,2010 11 :18 AM
To: bob.shireman@ed.gov; burd@newamerica.net; Deanne Loonin;
James R. Kvaal@who~eop.gov; LAsher@ticas.org; lklipp@ticas.org;
luke swarthciut@help.senate.gov; nassirianb@aacrao.org
Subject: FW: Height Analytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

FYI

From: J arrel Price [mailto:jprice@heightanalytics.com]

Sent: Tuesday, February 02, 201010:53 AM
To: Jarrel Price
Subject: FW: Height Analytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

All,

Please see yesterday's report examining the NegReg gainful employment

rule. We are working on a more detailed impact analysis, but as the
note suggests data is limited.

Please let me know if you have any questions/comments.

Best,
Jarrel

From: Jarrel Price

Sent: Monday, February 01,20108:32 AM
To: Users
Subject: Height Analytics -- For-Profit Ed: Gainful Employment Means
Higher Wages & Lower Tuition

For-Profit Ed: Gainful Employment Means Higher Wages & Lower Tuition

Height Analytics, LLC

Washington, D.C.
February 1,2010

The Negotiated Rulemaking (NegReg) process was filed with contentious

. issues (negotiators failed to reach consensus on 5 out of 14 topics),
but the Department of Education's (ED) gainful employment (GE) rule was
finally accepted to be the greatest potential threat to the for-profit
education sector. ED may tweak the GE rule (which could significantly
105
alter exposure), but it's unlikely that ED will scrap the
debt-to-earnings cap in its final rule. Uncertainty about the final
rule, the data ED will use to evaluate compliance, and which companies
are most exposed will prolong the regulatory overhang from this NegReg
process. Below we examine exposure, potential changes to the rule, a
quick look at incentive compensation and a timeline of next steps.

Who is Most Exposed to Gainful Employment? There is a disconnect between .

Wall Street and -ED's expected impact from the GE rule. Based on what we
know right now, longer duration high-cost programs appear most
vulnerable to the debt-to-earnings limit (negative - ESI, APOL, DV,
STRA, BPI). However, ED outlined an approach for which there is no data
(it will start beingcollected when the rule becomes effective). As
such, impact analyses could be varied and create further uncertainty in
the space.

Will Gainful Employment Impact "Outliers" or a Significant Number of

Programs? ED's data suggests that exposure is limited (i.e. only 120 or
6.7% of its 1,800 program sample are above the threshold) and
certificate programs, specifically culinary schools, are most vulnerable
(negative - CECO, EDMC). This discrepancy leads to the question - will
ED change its approach i£lwhen ED reviews data that shows its GE rule
impacting degree programs and more than just the 1t outliers"?

Could ED Completely Scrap the Gainful Employment Rule? Completely

dropping GE from the fmal rule is unlikely. Even though ED developed .
its gainful employment rule based on analysis of a very limited sample,
senior ED officials appear comfortable with their GE formula. If
further data analysis shows the magnitude of violations growing beyond
just "outlierlt certificate programs, ED said it would only build their
resolve go forward with the rule and fix the problem.

.What Changes Might ED Make to the GE Rille? ED will analyze data over the
next several months in conjunction with other government agencies to
determine if any modifications are needed. ED has implied, however, that
any changes would likely be offset to keep the scope ofthe GE rule the
same. For example, ED said that if it changes the formula from
total-debt to debt-from-the-most-recent-institution-attended, it might
reduce the 8% limit so that the targeted number of institutions remains
the same. We will monitor the inter-agency review process over the next
several months to determine if ED will accept any surprisingly positive
changes.

How Obtainable Are the ItAlternatives" in the GE Rule? It will require

further analysis to determine how many programs might be able to meet
the two alternatives measures outlined in the GE rule. After exceeding
the 8% debt-to-earnings ratio, a program can maintain Title IV
eligibility if it proves the actual earnings of its graduates keep it
below the 8% threshold or if graduates show >90% loan repayment. It
remains unclear how many programs can keep their "true lt default rates
(excluding forbearances or deferments) low enough to meet this loan
106
 repayment threshold, but promoting Income Based Repayment (IBR) could
help keep graduates out of default.

What About Congress? Intervention under a Democratic Congress is

unlikely.

Will Incentive Compensation Constrain Business Models? Companies must

now show that compensation is not "indirectly or indirectly" based on
securing enrollments of financial aid (instead of "solely" based on
these memes). However, ED will allow merit-based pay (in certain
circumstances) and payments to 3rd-party lead aggregators, so long as
compensation is based on retention/completion (i.e. not applications or
enrollments).

For a PDF version of this 3-page report, including a list of previously

published research on this topic, please refer to the attached file.

RISKS

The legislative and regulatory agendas are subject to change at the

discretion ofleadership. Unprecedented economic conditions could
instigate unanticipated and/or sweeping shifts in policy. Predicting the
.future is a hazardous endeavor and economic / market forecasting is an
imprecise science. Actual outcomes may differ substantially from our
forecasts. The predictions and opinions expressed herein are subject to
change at any time.

ANALYST CERTIFICATION

I, Jarrel Price, certify that (i) the recommendations and opinions

expressed in this research report accurately reflect the research
analyst's personal views about any and all ofthe subject securities or
. issuers discussed herein and (ii) no part of the research analyst's
compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by the research analyst in
the research report.

I, Andrew Parmentier, certify that (i) the recommendations and opinions

expressed in this research report accurately reflect the research
analyst's personal views about any and all of the subject securities or
issuers discussed herein and (ii) no part of the research analyst's
compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by the research analyst in
the research report.

DISCLAIMER

This report is intended for the private use of Height Analytics ' clients
and prospective clients. Reproduction or editing by any means, in whole
or in part, or any other unauthorized use, disclosure or redistribution
of the contents without the express written permission of Height
107
Analytics is strictly prohibited. The infonnation contained in this
report has been obtained from sources which Height Analytics believes to
be reliable; however, Height Analytics does not guarantee the accuracy,
completeness or timeliness of any infonnation or analysis contained in
the report. Opinions in this report constitute the personal judgment
of the analysts and are subject to change without notice. The
infOlmation in the report is not an offer to purchase or sell any
security.

Users assume the entire cost and risk of any investment decisions they
choose to make. Height Analytics shall not be liable for any-loss or
damages resulting from the use of the infonnation contained in the
report, or for errors of transmission of iirfonnation, or for any third
party claims of any nature. Nothing herein shall constitute a waiver or
limitation of any person's rights under relevant federal or state
securities laws.

108
Bergeron. David

From: Shireman, Bob

Sent: Thursday, April 22, 2010 8:01 AM
To: Yuan, Georgia; Bergeron, David; Kanter, Martha
Cc: Rose, Charlie; Dannenberg, Michael
Subject: FW: Gainful employment fact sheet, memo and Q&A
Attachments: QA on Gainful Employment - Final.pdf; Neg Reg Fact Sheet - Final.pdf; TICAS memo on CRA
Report 4_15_10.pdf

-_._._------
From: Pauline Abernathy [mailto:pabernathy@ticas.org]
sent: Thursday, April 22, 2010 7:30 AM
To: Manheiiner! Ann; Arsenault! Leighi Gomez, Gabriella
Cc: Shireman, Bobi James_R._Kvaal@who.eop.gov
Subject: Fw: Gainful employment fact sheet, memo and Q&A

FYI.

---- Original Message -----

From: Pauline Abernathy
To: Pauline Abernathy
Cc: 'Patrice.willoughby@mail.house.gov' <Patrice.willoughby@maiLhouse.gov>; 'Patricia.villarreal@mail.house.gov'
<Patricia.villarreal@mail.house.gov>;·'Gloria.Chan@mail.house.gov' <Gloria.Chan@mail.house.gov>; Connie Myers
<connie.myers@nelsonmullins.com>; Debbie Frankle Cochrane; 'Angela M. Peoples' <leg@Usstudents.org>; 'Deanne Loonin'
<dloonin@nclc.org>; Jamienne S. Studley <jstudley@publicadvocates.org>; Barmak Nassirian <barmak@aacrao.org>
Sent: Wed Apr 21 16:10:092010
Subject: Gainful employment fact sheet, memo and Q&A

Tri-Caucus members:

In response to several questions about "gainful employment," the Project on Student Debt worked with student, consumer and higher
education organizations to create the attached fact sheet and Q&A. Produced jointly by the U.S. Student Association, National
Consumer Law Center, Public Advocates, American Association of Collegiate Registrars and Admissions Officers, and Institute for
College Access & Success, the attached provide background on gainful employment and incentive compensation, as well as answers
to common questions about the regulatory process and gainful employment. Also attached isa two-page memo to interested parties
regarding the recent Career College Association paper on gainful employment.
We hope you fmd these materials helpful and will contact us with any questions related to college access and succes «QA on Gainful
Employment - FinaI.pdf» s..
«QA on Gainful Employment - FinaI.pdf «Neg Reg Fact Sheet - FinaI.pdf»» «Neg Reg Fact Sheet - FinaI.pdf> <<TICAS
memo on CRA Report 4_15_1O.pdf» > «TICAS memo on CRA Report4_IS,-lO.pdf».

Pauline Abernathy
Vice President
The Institute for College Access & Success
www.ticas.org and www.projectonstudentdebt.org
We moved! TICAS' main number is now 510.318.7900. My direct line is S1O.318.7903.

85
Bergeron, David

From: Bergeron, David

Sent: Tuesday, March 30,20108:25 AM
To: Shireman, Bob
Subject: RE: Fwd: the best thing ever to happen for proponents of gainful employment
Attachments: Talking Point Gainful Employment dab revised to include NPSAS.doc

Bob J this has been updated to add a brief piece from the NPSAS analysis.

David

From: Shireman J Bob

Sent: TuesdaYJ March 38 J 2818 8:84 AM
To: Bergeron J David
Subject: Fw: Fwd: the best thing ever to happen for proponents of gainful employment

We can talk before or after your fbi.

From: Nassirian J Barmak <barmak@aacrao.6rg>

To: Pauline Abernathy <pabernathy@ticas.org>; Lauren Asher <LAsher@ticas.org>; Steve Surd
<Burd@newamerica.net>; David Hawkins <dhawkins@NACAC.com>; Deanne Loonin <dloonin@nclc.org>;
Luke Swarthout <Luke Swarthout@help.senate.gov>; Shireman J Bob; Dannenberg J Michael; James R.
Kvaal <James R. Kvaal@who.eop.gov>; Rich Williams <rwilliams@pirg.org>; Angela M. Peoples
<leg@usstudents.org>; Michelle Cormier <CormierM@aacrao.org>; Arsenault, Leigh; Gomez,
Gabriella
Sent: Thu Mar 18 12:13:58 2010
Subject: Fwd: the best thing ever to happen for proponents of gainful employment

The UBS analyst who covers for-profit education J Andrew Fones, put out a 16-page report today
entitled J ~State Budgets Offset Gainful Employment.' In it, he espouses the case that the
for-profit education companies have all sorts of tailwinds. More importantlYJ he attempts to
analyze how gainful employment would affect the companies and his conclusions are incredibly
benign. By his reckoning, he says the worst-case scenario for 2011 earnings per share under
gainful employment would be: ITT Educational Services would see earnings decline 3%,
Corinthian Colleges would see earnings decline by 3%, DeVry would see earnings decline by
14%, Strayer would see earnings decline by 16%J Career Educati6n would see earnings decline
by 19% and Apollo Group/University of Phoenix would see earnings decline by 34%.
WHY ARE THE FOR-PROFIT EDUCATION COMPANIES WORRYING ABOUT GAINFUL EMPLOYMENT? If this is the
worst case scenario, then all of their lobbying laments are much ado about nothing.
[cid:image001.gif@01CAC69A.EFDEF4F8]

90
Bergeron, David

From: Shireman, Bob

Sent: Tuesday, March 30,20108:05 AM
To: Bergeron, David
Subject: Fw: Fwd: the best thing ever to happen for proponents of gainful employment
Attachments: image001.gif; EDU 3.18.10 UBS.pdf

We can talk before or after your fbi.

From: Nassirian, Barmak <barmak@aacrao.org>

To: Pauline Abernathy <pabernathy@ticas.org>; Lauren Asher <LAsher@ticas.org>; Steve Surd
<Burd@newamerica.net>; David Hawkins <dhawkins@NACAC.com>; Deanne Loonin <dloonin@nclc.org>; Luke
Swarthout <Luke Swarthout@help.senate.gov>; Shireman, Bob; Dannenberg, Michael; James R. Kvaal
<James R. Kvaal@who.eop.gov>; Rich Williams <rwilliams@pirg.org>; Angela M. Peoples <Ieg@usstudents.org>;
Michelle Cormier <CormierM@aacrao.org>; Arsenault,Leigh; Gomez, Gabriella
Sent: Thu Mar 1812:13:582010
Subject: Fwd: the best thing ever to happen for proponents of gainful employment

The UBS analyst who covers for-profit education, Andrew Fones, put out a 16-page reporttoday entitled, 'State Budgets
Offset Gainful Employment.' In it,· he espouseS the case that the for-profit education companies have all sorts of tailwinds.
More importantly, he attempts to analyze how gainful employment would affect the companies and his conclusions are
incredibly benign. By his reckoning, he says the worst-case scenario for 2011 earnings per share under gainful
employment would be: ITT Educational Services would see earnings decline 3%, Corinthian Colleges would see earnings
decline by 3%, DeVry would see earnings decline by 14%, Strayer would see earnings decline by 16%, Career Education
would see earnings decline by 19% and Apollo Group/University of Phoenix would see earnings decline by 34%.

WHY ARE THE FOR-PROFIT EDUCATION COMPANIES WORRYING ABOUT GAINFUL EMPLOYMENT? If this is the
worst case scenario, then all of their lobbying laments are much ado about nothing.

Chart 4: ScenaMo 1: Upside and Downside to FY2011 EPS Estimates

Current Vpsige Downside . Average
2011 EPS 2011 EPS % 2011 EPS % 2011 EPS %
COCO $ 2.12 $ 3.41 61% $ 2~05 .J~/o $ 2.73 2!
DV $ 4.60 $ 7£2 66% $ 3.94 -14% $ 5.78 2f
ESI $ 13.78 '$ 18.55 35% $ 13.35 -3% $ 15.95· 11
CEca $ 3.45 $ 4]8 39% $ 2.80 -19%$ 3.79 11
STRA $11.80 $ 16.04 36% $ 9.85 -16% $ 12.95 11
APOl :$ 6.18$ ]]4 25% $ 4.00 ° $..
t
- 34• 10 5.91

Source: UBS estimates

91
Bergeron, David

From: Bergeron, David

Sent: Tuesday, March 02,20105:53 PM
To: Dannenberg, Michael
Subject: RE: What is Gainful Employment? / What is Affordable Debt?

Thanks. A couple of people have sent me this. I'm not sure that any analysis of the
proposal would find problems with either (1) the analysis or (2) the policy. Our proposal,
as revised based on input from various quarters, will address most of the concerns raised and
provide for a long phase in period. So, Mark's analyzed an approach that we've moved from
not withstanding the fact that no one wanted to negotiate this at the table. If Bob hasn't
shared the most recent version of what we are working on, ask John Kolotos of my staff for
the latest. I think we've made good progress including getting a way to get REAL incomes for
graduates including those that are self-employed by working with SSA.

From: Dannenberg, Michael

Sent: Tuesday, March 02, 2010 10:34 AM
To: Bergeron, David
Subject: FW: What is Gainful Employment? I What is Affordable Debt?

Hope you'; re enjoying Bogota. See below . Kantrowitz...

From: Pauline Abernathy [mailto:pabernathy@ticas.org]

Sent: Tuesday, March 02, 2010 10:32 AM
To: Shireman, Bob; Arsenault, Leigh; Dannenberg, Michael; Madzelan, Dan
Cc: Lauren Asher; Debbie FrankIe Cochrane
Subject: FW: What is Gainful Employment? / What is Affordable Debt?

I am concerned this is going to create a firestorm if not responded to immediately.

(I haven't read Mark's paper yet -- could he have misunderstood the impact of using medians?)

---~-Original Message-----
From: Kantrowitz, Mark [mailto:Mark.Kantrowitz@Monster.com]
Sent: Monday, March 01, 2010 9:55 PM
To: lasher@ticas.org; Baum, Sandy; tom@postsecondary.org; nassirianb@aacrao.org; Steve Surd;
Rich Williams; Deanne Loonin
Cc: Kantrowitz, Mark
Subject: What is Gainful Employment? / What is Affordable Debt?

It took me a month to write this paper because of all the analysis, but I think it adds some
clarity on the gainful employment issue. In the rush to propose a definition of gainful
employment, the US Department of Education was unintentionally a little bit too harsh,
yielding a definition which would have eliminated almost all for-profit colleges. (If that
was the Department's intent, there are simpler ways of doing it. j-) Some slight adjustments
are all that is needed to make the proposals more effective at separating the wheat from the
chaff.

Barmak: You may not like this, but I think the two affordable debt provlSlons, with my
proposed modifications, should be applied to *all* colleges, not just for~profit colleges.
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The lack of a profit motive at non-profit and public colleges is no excuse for graduating
students with excessive debt. I actually hear from more borrowers with debt problems who
attended a certain non-profit New York university than from borrowers who attended for-profit
colleges.

Mark

-----Original Message-----

From: Kantrowitz, Mark

Sent: Monday, March 01, 2010 9:29 PM

To: FINAID-L@LISTS.PSU.EDU

(c: Kantrowitz, Mark

Subject: What is Gainful Employment?

The Higher Education Act of 1965 requires for-profit colleges to provide "an eligible program
of training to prepare students for gainful employment in a recognized occupation" but does
not currently define gainful employment.

During negotiated rulemaking for Higher Education 2009-10, the us Department of Education
proposed defining gainful employment by establishing an 8% debt-service-to-income threshold
based on median student debt for recent college graduates with income based either on Bureau
of Labor Statistics 25th percentile wage data or actual earnings of the college's graduates.
Loan payments would be based on the standard 10-year repayment plan for the unsubsidized
Stafford loan program. For programs that failed to satisfy this standard, the US Department
of Education proposed an alternative that requires a loan repayment rate for recent college
graduates of 90%. The loan repayment rate measures the percentage of borrowers actively
repaying their loans. It is a dual to the default rate, but includes borrowers who are
delinquent, in an economic hardship deferment or in forbearance along with borrowers who are
in default.

I have prepared a report analyzing the implications of the proposed policy change.

The full report can be found at

http://www.finaid.org/educators/Z0100301gainfulemployment.pdf

Some of the key findings of the report include:

1. The 8% debt-service-to-income threshold will preclude

for-profit colleges from offering Bachelor's degree

programs and would eliminate many Associate's degree

programs.

2. The 90% loan repayment rate would be the equivalent of

requiring colleges to have a two-year cohort default

rate of less than 2.3% for students who graduated.

This loan repayment rate is unattainable for most

colleges (not just for-profit colleges) as it

represents a much harsher standard than the current

cohort default rate requirements.

3.. The proposed use of Bureau of Labor Statistics wage

data will disproportionately harm minority and female

students because a Bachelor's degree conveys a greater

increase in earnings for these students even though

the median income is lower than for White and male

students.

4. The debt-service-to-income threshold effectively

establishes borrowing limits based on field of study

and degree program, but does not give the colleges the

controls needed to enforce these limits. Current

subregulatory guidance precludes colleges from

establishing lower loan limits.

5. The proposals focus on affordable debt for the

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 definition of gainful employment, and fail to consider

other possible definitions, such as lower unemployment

rates, more job prospects and greater job security.

Benchmarking increases in income against median income

for high school graduates fails to consider the zero

income of someone who is unemployed.

The report includes two main recommendations:

1. Several of the flaws in the current proposal can be

fixed by adjusting the thresholds. This includes:

- Increasing the debt-service-to-income threshold from

8% to somewhere between 10% and 15%. Default rates

start rising sharply at about 13% of income. A

debt-service-to-income threshold of 13.8%

corresponds to the rule of thumb that students

should not borrow more for their entire education

than their expected starting salary.

- Increasing the loan term in the loan payment

calculation from 10 years to 20 years.

- Switching from a percentage of gross income to a

percentage of discretionary income, such as 20% of

discretionary income.

- Changing the loan repayment rate threshold for

95
 recent graduates from 913% to 75%.

2. Because of the interactions with cohort default rates

and the 913/10 rule, the definition of gainful

employment should not be proposed in isolation, but

rather as part of a comprehensive and coordinated

policy. Such a policy might require some statutory

changes, so perhaps the US Department of Education

should hold off on defining gainful employment as part

of the negotiated rulemaking and instead propose a

comprehensive suite of statutory changes.

Mark Kantrowitz

Publisher of FinAid.org and FastWeb.com

Mark Kantrowitz

Publisher of FinAid.org and FastWeb.com

Author, FastWeb College Gold

FinAid Page LLC

PO Box 2056

Cranberry Township, PA 16066-1056

Tel: 1-724-538-45013

Fax: 1-724-538-4502

Email: mkant@finaid.org.mkant@fastweb.com

www.fastweb.com www.finaid.org www.collegegold.com

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