21 Jul 2009 - 06:06:15 PM PDT
House committee shows surprise support for the For Profits
The House committee on Education and Labor easily approved (42 to 5) an
amendment today proposing temporary relief on the 90/10 rule for for-profit
schools, along with its approval of the Student Aid and Fiscal Responsibility
Act of 2009. The 90/10 rule requires for-profit schools to derive at least 10
percent of their revenue from non-Title IV sources. APOL discussed that it
would be just under the threshold in FY09 (YE Aug). This Gov't support for
the For Profits, including from Democrats, may reduce the market's concerns
regarding the regulatory environment. We reiterate our Buys on ESI
and APOL.
Relief would be only temporary but is a step in the right direction
New Jersey rep Robert Andrews (D) offered the amendment which would
give for-profit schools until July 1, 2012 to comply with 90/10 (an extra year),
suspend counting 'emergency loans' in the Federal (Title IV) funding calculation,
and temporarily exclude new Perkins loans from counting against the
10% non-Title IV sources for a two year period.
This bill has a good chance to pass the House before the August recess
We believe the Student Aid and Fiscal Responsibility Act, including this new
amendment, has a good chance of House approval prior to the August recess
due to i) the amendment's small size and insignificance relative to the
rest of the bill, ii) strong support of the bill from committee chairman George
Miller, and iii) the relatively un-contentious nature of the bill itself relative to
other pending, and perhaps more difficult, legislation: healthcare, financial
regulation, consumer protection. If approved by the House, the bill will still
require Senate approval. We note that Congress has an October 15 deadline
for this legislation.
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