November 14, 2017

Bridgepoint SEC Filing Raises Questions About Continued Federal Funding

Bridgepoint SEC Filing Raises Questions About Continued Federal Funding

A filing Monday with the Securities and Exchange Commission by troubled Bridgepoint Education raises questions about the company’s continued compliance with a federal law requiring for-profit colleges to obtain at least 10 percent of their revenue from sources other than Department of Education-provided student grants and loans.

Bridgepoint’s access to other funding was placed in jeopardy last week when the Department of Veterans Affairs informed the company’s online-only Ashford University that it was questioning the appropriateness of the state of Arizona serving as the approving state for GI Bill education benefits. Ashford sought to make Arizona its new base for GI bill funding after the state of Iowa dropped its approving status, following Ashford’s closing of its physical campus in the state.

The VA announced its intention to suspend payment of GI bill funds and approval of new student enrollments at Ashford unless the company corrected the state approval issue.
While Bridgepoint in its SEC filing said it would “vigorously challenge” that VA decision, it also sought to ensure investors that it would not run afoul of federal law even if it lost the VA funding:
In fiscal year 2017, our veteran students comprise approximately 10% of our total enrollment and approximately 5% of our revenue. If Ashford University were to lose all access to military affiliated students, it would continue to be in compliance with the 90/10 Rule.
What Bridgepoint did not expressly mention in its filing is that the VA’s decision put at risk another source of non-Education Department funding. A school’s participation in the Defense Department Tuition Assistance (TA) program — funding education for active duty troops — is dependent upon approval by the VA for participation in the GI Bill. If a school loses GI bill eligibility, which is what Ashford faces, it also loses TA dollars.  While Bridgepoint did reference “military affiliated students,” it did not expressly note that its TA dollars are at risk from the Department’s decision.

It’s also not clear how Bridgepoint will be able to satisfy the 90-10 rule if both VA and TA money is withdrawn.

A new report from Veterans Education Success reveals that in 2013-14 Ashford University obtained $546,796,000 in Education Department aid, plus $81,859,427 in VA and TA benefits, for a total of 98.4 percent of its revenue coming from federal sources. (Bridgepoint’s only other school, University of the Rockies, had $22,346,000 from the Education Department and $1,853,544 from VA and TA, and 94.8 percent federal money. That school is treated separately for 90-10 purposes.)

Unless these revenue streams are now significantly changed, it’s hard to say how Bridgepoint can remain in compliance with 90-10 if it loses VA and TA dollars, and the SEC filing offers no details.

The Chronicle of Higher Education report this week states that GI Bill and other military programs provide Bridgepoint with $72 million a year in revenue.

Bridgepoint, which then-Senator Tom Harkin (D-IA) called “an absolute scam” after investigating the company, has faced multiple federal and state law enforcement investigations.

Bridgepoint is where Robert Eitel worked as chief compliance officer before he joined the Department of Education as senior advisor to DeVos. Linda Rawles, an attorney chosen by the DeVos Department to serve on the ongoing panel crafting rules to govern student debt relief, also works for Bridgepoint, according to her LinkedIn profile.

I have reached out to Bridgepoint for comment and will report back if the company clarifies its position.

UPDATE 11-15-17 7:30 am

Bridgepoint this morning filed a new 8K with the SEC, this time mentioning the risk that we discussed above — the risk of losing TA funding; announcing that yesterday “Ashford University decided to temporarily suspend new enrollment of veteran students utilizing GI Bill benefits”; and repeating the assertion that ‘”if Ashford University were to lose all access to military affiliated student funds, it would still be in compliance with the 90/10 Rule.”

UPDATE 11-15-17 1:50 pm

I have just received a response from Lauren Coatney, Senior Manager, Social Media & PR, at Bridgepoint:

Per your promise at the end of the article to “report back if the company clarifies its position” please add this statement in full to your piece:
You sent your request for comment at 10:44 am Pacific time, and published your article seven minutes later at 10:51 am. Had you allowed time for a response consistent with responsible journalistic practices, we would have informed you that our position is appropriately stated in the SEC filing you cite. We will continue to be in 90-10 compliance even if we lose all of our military-affiliated students, including veteran, active duty and reservists.
The revenue numbers you reference are almost five years old, and therefore not relevant to our current status.
Your piece also contains factual errors.
It is not the case Ashford’s approval for GI Bill benefits in the state of Iowa has been dropped. Ashford has been in litigation with the Iowa Department of Education regarding its unlawful effort to withdraw its approval for more than a year, and that litigation continues today, with Ashford’s Iowa approval still in effect during the pendency of the litigation.
You also misspelled our company’s name.
Now that the “question” “raised,” in your mind at least, by the filing has been answered, we trust that you will change the headline as well.

I responded to Coatney that the fact that Bridgepoint filed a new 8k today referencing the fact that DoD Tuition Assistance funding was also now at risk — which it did not do in the Monday filing — indicates that its Monday filing raised questions. Had Bridgepoint’s Monday filing provided greater specifics about its funding sources, that might also have clarified the situation, especially in light of Bridgepoint’s heavy reliance on federal funding in past years. So I stand by the headline and the article. I have corrected the one place in the article that I referred to Bridgepoint as “Bridgeport.”

This article also appears on HuffPost.