Assignment 2 Case Study Analysis PowerPoint (PPT) Presentation: Prepare a case study analysis on Case 3: “The Apollo Group, Inc. [University of Phoenix]” found in the Cases section of your digital textbook. Closely follow the PowerPoint Template by clicking on the hyperlink. Please utilize this template to help you complete this Assignment. Focus upon the idea of conducting a case study analysis with respect to The Apollo Group’s multi-business strategy using one of the three portfolio approaches to move the company competitively forward. Explain why a business might choose a low cost, differentiation, or speed-based strategy. Use titles and subtitles per slide for each guidelines element. Please include the SWOT analysis with the four quadrants on the SWOT diagram slide. You can find the Case Study SWOT analysis template in Doc Sharing for reference. Assignment Checklist: • Describe and illustrate one of the three portfolio approaches. • Explain why a business would choose a low cost, differentiation, or speed-based strategy. • Conduct a strategic analysis and choice for a multi-business company. The PowerPoint template for this Assignment can also be found in Doc Sharing. For extra help on using this template, watch the Assignment video by clicking on the Presentation icon. For general PowerPoint tutorials, click on the Tutorial icon. In this Assignment that focuses upon the idea of conducting a case study analysis with respect to multi-business strategy using one of the three portfolio approaches to move the company competitively forward , you will engage in developing the following professional competency: • Leadership with respect to knowing how to use software for job to support business analysis and operations For additional Assignment details see Rubric below. Case 3: The Apollo Group, Inc. [University of Phoenix] Richard B. Robinson • 1 A 55-year-old college professor at San Jose State University with a PhD from Cambridge University and previous teaching jobs at Maryland, Ohio State, and Northern Illinois, John Sperling was a surprise entrepreneur when he started the Apollo Group, parent company of the University of Phoenix, in 1976. Ambitious, his goal was to revolutionize conventional higher education. Most people would say that Sperling, recently celebrating his 91st birthday, has done just that. • 2 Rather than catering to 18- to 22-year-olds looking to find themselves, Sperling focused on the then-neglected market of working adults. And he recruited working professionals as teachers, rather than tenured professors. UOP (on-campus and online) has more than 33,000 faculty members with less than 5 percent being full-time. Most radical of all, while nearly all other universities are nonprofits, Sperling ran his university to make money. Those ideas sparked overwhelming resistance from the education establishment, which branded UOP a “diploma mill.” The result? “We faced failure every day for the first 10 years,” said founder Sperling, who turned 91 in 2012. • 3 From an IPO adjusted price of $0.76 to a mid-2005 high of $98, Apollo’s stock reflected a company BusinessWeek considered among the top 50 performing companies on Wall Street. The Phoenix-based company, whose day-to-day operations were still generating average annual revenue growth exceeding 30 percent over that time, saw its revenues reach $5 billion in 2010 with net income exceeding $550 million. It has also joined the S&P 500. • 4 Tuition at Apollo averages only $18,000 a year, 60 percent of what a typical private college charges. A key factor, says Sperling, is that universities for the young require student unions, sports teams, student societies, and so on. The average age of a UOP student is 35, so UOP doesn’t have those expenses. It also saves by holding classes in leased office spaces around the country, and online, By 2010, over 75 percent of UOP students studied at University of Phoenix Online. • 5 By 2010, the UOP had become the dominant player in the online education market that still has lots of potential for growth. The bricks-and-mortar University of Phoenix was one of the first institutions to identify and serve the burgeoning market for educating working adults. In the late 1980s, long before the Web debuted, the school began to experiment with offering its classes online. It got off to a slow start, “and we lost money for a number of years,” recalled Brian Mueller, Apollo’s former president. • 6 As a result of this head start, however, UOP’s online option was ready to capitalize on an online-education market that began exploding in the mid-1990s. Today, it is estimated that over 10 percent of the U.S. students earning a degree via the Net are enrolled through the UOP’s online option. UOP’s online option also garners an outsize share of the industry’s revenues—about one-third of the total. That’s because as the market leader, it can charge higher tuition than most rivals. Undergraduates pay a little more than $18,000 a year at UOP, while students seeking a master’s degree pay nearly $25,000. “They’re by far the giant in this industry,” says Eduventure market analyst Sean Gallagher. Source: © 2012. This case was developed based on publicly available information from the Apollo Group, Inc., the University of Phoenix, interviews with UOP students and professors, and selected reports as cited. • 7 Online education is rapidly growing, but it is still just getting started. “There are 70 million working adults in this country who don’t have a college degree,” says Gallagher. Increasingly, they realize that they need a degree to get ahead. But because they often have a family as well as a job, studying online is the most convenient solution. Howard Block, an analyst at Banc of America Securities, predicts “dramatic enrollment growth” for UOP’s online option. He expects that half of the students in postsecondary education will one day make at least some use of the Internet to earn their degrees. GLOBAL OUTREACH • 8 UOP began to seriously tap the international market with its online option in 2005, initially “bringing in about 500 students a month,” said Mueller. “But that’s just the tip of the iceberg.” Though the UOP started offering online classes only in English, it has begun to offer courses in Spanish and plans to introduce Mandarin soon as well. Ironically, UOP has done all this with plain-vanilla technology. While other companies charged into online education with dazzling digital content, UOP has historically offered primarily a text-heavy format that can easily be accessed with dial-up modems. • 9 This might sound like a recipe for failure. But UOP realized that interaction with humans—the professor and other students in the class—was far more important to success than interaction with the digital content. Thus, UOP keeps its classes small, averaging just 12 students. And to combat the Achilles heel of distance education—a high dropout rate—it offers its students plenty of hand-holding, including round-the-clock tech support. The result: 65 percent of its students go on to graduate. • 10 Some see plain technology as a potential negative for the virtual college. “At some point, UOP online will need to upgrade the sophistication of its platform,” warned Trace Urdan, an analyst with ThinkEquity Partners, a boutique investment bank. That will require more spending on research and development and information technology, he warns, which could crimp margins. Still, any extra spending could be easily offset if UOP bumped up its class size to 15 students, argueed Block. Even with today’s small classes, operating profit margins now top 20 percent. As if listening to them, the UOP now has an excellent, visual explanation of how this type of multifaceted online educational approach works.1 THE ONLINE TREND • 11 The dot-com bubble may have burst in the world of commerce, but the promise of harnessing the Internet for paradigm-changing growth—and even profits—still thrives in the halls of academia. • 12 A decade after the dot-com fizzle began, e-learning has emerged from the wreckage as one of the Internet’s most useful applications. Nearly 90 percent of the 4,000 major colleges and universities in the United States now offer classes over the Internet or use the Web to enhance campus classes, according to market researcher International Data Corp. About 7 million students took online classes from U.S. higher-ed institutions in 2010 according to John G. Flores, head of the U.S. Distance Learning Assn., a nonprofit trade group outside Boston. And it’s not just a U.S. phenomenon: students from developing countries are jumping online, too. • 13 These classes continue to open new horizons for the fastest-growing segment of higher education: working adults, who often find it difficult to juggle conventional classes with jobs and families. Adults over 25 now represent nearly half of higher-ed students; most are employed and want more education to advance their careers. • 14 E-learning is an influence in the traditional college class as well. Online classes won’t replace the college experience for most 18- to 24-year-olds. But from the Massachusetts Institute of Technology to Wake Forest University in North Carolina, colleges are using the Web in on-campus classes to augment textbooks and boost communication. And students, far more technology savvy than many of their professors or administrators, are using Web-based tools, social media, and many other approaches to morph Web-based capabilities into their academic experience with or without their university following along, or even approving. MASS MARKET? • 15 Quality is a problem, which is a key reason why many online students drop out. That will force a further shakeout, eliminating mediocre players. Many colleges grapple with such issues as how much time their faculty should devote to e-teaching. And long-established rules make it difficult for online students to get financial aid. Even as these problems are resolved, “online learning will never be as good as face-to-face instruction,” argues Andy DiPaolo, director of the Stanford Center for Professional Development, which offers online graduate classes to engineers. • 16 Ultimately, the greatest e-learning market may lie in the developing world, where the population of college-age students is exploding. Just as cell phones leapfrogged land-based telephones in many developing countries, so may e-learning help to educate the masses in countries that lack the colleges to meet demand—and can’t afford to build them. COST-EFFECTIVE • 17 E-learning is a good fit with the military, where frequent transfers complicate pursuing a degree. The U.S. Army awarded PWC Consulting a $453 million, five-year contract to create an electronic university that allows soldiers to be anywhere and study at Kansas State University or any of the 24 colleges involved in the program. • 18 eArmyU already has changed the perspective of soldiers like Sergeant Jeremy Dellinger, 22, who had been planning to leave the Army to go back to school when his basic enlistment ends. Then he enrolled in eArmyU to earn his bachelor’s degree from Troy State University in Alabama. “Now I can get my degree and still do the work I love” as a supply sergeant, says the Fort Benning (Ga.)-based soldier. Like Dellinger, about 15 percent of those who have signed up so far have reenlisted or extended their commitment. By cutting turnover, “eArmyU could almost pay for itself,” says program director Lee Harvey, since it costs nearly $70,000 to train green recruits. • 19 Corporations, too, see e-learning as a cost-effective way to get better-educated employees. Indeed, corporate spending on e-learning is expected to more than quadruple by 2015, to $35 billion, estimates IDC. At IBM, some 500,000 employees received education or training online last year, and 75 percent of the company’s Basic Blue class for new managers is online. The move cut IBM’s training bill by $750 million last year, because online classes don’t require travel. CAUTIOUS ELITES • 20 Phoenix Online aside, the big e-learning winners so far are the traditional nonprofit universities. They initially captured nearly 95 percent of online enrollments, figures A. Frank Mayadas, head of e-learning grants at the Alfred P. Sloan Foundation. Most active are state and community colleges that started with strong brand names, a faculty, and accreditation, says Mayadas, as well as a tradition of extension programs. • 21 By contrast, many elite universities have been far more cautious about diluting the value of their name. Harvard Business School believes it would be impossible to replicate its classroom education online. “We will never offer a Harvard MBA online,” vows professor W. Earl Sasser, chairman of HBS Interactive, which instead develops e-learning programs for companies. MIT faculty nixed teaching classes online, fearing “it would detract from the residential experience,” says former faculty chair Steven Lerman. • 22 That didn’t stop MIT from embracing the Internet in a different way. Over the next five years, MIT plans to post lecture notes and reading assignments for most of its 2,000 classes on the Web for free, calling the effort “OpenClassWare.” Lerman says “it’s a service to the world,” but he says it’s no substitute for actual teaching, so faculty aren’t worried about a threat to classroom learning. • 23 A few other top schools see profit-making opportunities. Since 1996, Duke University’s Fuqua School of Business has been offering MBAs for working executives. In these blended programs, some 65 percent of the work is done online and just 35 percent in classes held during required residencies that consume 9 to 11 weeks over two years. Duke charges well over $95,000 for these programs—vs. $75,000 for its traditional residential MBA. Yet they have been so popular that by next year, “we’ll have more students in nontraditional programs than the daytime program,” according to Fuqua’s dean. The extra revenues are helping Fuqua to double its faculty. The Adult Education Market • 24 The adult education market is a significant and growing component of the postsecondary education market, which is estimated by the U.S. Department of Education to be a more than $450 billion industry. According to the U.S. Department of Education, over 7 million, or 45 percent of all students enrolled in higher education programs are over the age of 24. This number is projected to reach 6.7 million in 2011. The market for adult education in the United States is expected to increase as working adults seek additional education and training to update and improve their skills, to enhance their earnings potential, and to keep pace with the rapidly expanding knowledge-based economy. • 25 Many working adults are seeking accredited degree programs that provide flexibility to accommodate the fixed schedules and time commitments associated with their professional and personal obligations. President Obama, with the United States trying to gain traction coming out of the “Great Recession,” said in his 2011 State of the Union address that having no degree is really no longer an option: Many people watching tonight can probably remember a time when finding a good job meant showing up at a nearby factory or a business downtown. You didn’t always need a degree, and your competition was pretty much limited to your neighbors. If you worked hard, chances are you’d have a job for life, with a decent paycheck, good benefits, and the occasional promotion. Maybe you’d even have the pride of seeing your kids work at the same company. That world has changed. And for many, the change has been painful. I’ve seen it in the shuttered windows of once booming factories, and the vacant storefronts of once busy Main Streets. I’ve heard it in the frustrations of Americans who’ve seen their paychecks dwindle or their jobs disappear—proud men and women who feel like the rules have been changed in the middle of the game. • 26 His point: the rules of the game have changed. And, it would seem, the for-profit (industry participants prefer “proprietary”) collegiate education sector has grown to reflect the new reality that access to a higher education is no longer the province of the privileged few, but a prerequisite to “owning our future” as individuals, or as he sees it, a country. • 27 The need for more options in higher education to ensure more people gain the education necessary in a knowledge-based economy is greater today than ever before. Demographics, and a changing global economy, say it is a need that will only grow. • 28 Dr. Bruce Chaloux, president of the Sloan Consortium, estimates that there are more than 50 million working-age adults with some college credit but no degree, or who have a high school diploma but never entered college. Chaloux says that many of these adults would like to get their college degrees, but only if they’re given practical “adult-friendly” alternatives to traditional, campus-based programs. He identified eight key factors that influence an adult learner’s decision to attend college:2 o • Convenient time and place for classes o • Flexible pacing for completing the program o • Ability to transfer credits o • Reputation of institution as being adult friendly o • Need the degree for current or future job o • Receive credit for life/work experiences o • Financial aid or employer assistance o • Child care • 29 The Southern Regional Education Board in turn offers four guiding principles it finds essential to meeting the needs of adult college students:3 o • Online or blended delivery o • Accelerated (or compressed) terms o • Adult-friendly policies o • Supportive credit transfer and prior learning assessment • 30 Traditional colleges and universities have been slow to address the unique requirements of working adult students. First John Sperling, and now a global chorus of observers, has cited the following attributes of traditional, not-proprietary education institutions: o • Traditional universities and colleges were designed to fulfill the educational needs of conventional, full-time students aged 18 to 24, who remain the primary focus of these universities and colleges. o • This focus has resulted in a capital-intensive teaching/learning model in typical state and private colleges and universities that may be characterized by:  • a high percentage of full-time tenured faculty with doctoral degrees;  • fully configured library facilities and related full-time staff;  • dormitories, student unions, and other significant plant assets to support the needs of younger students;  • often major investment in and commitment to comprehensive sports programs;  • major administrative overhead for all the various university functions;  • politically-based funding; • o  • major resistance to change in any academic programs, even in the face of rapid global change across disciplines and professions;  • an emphasis on research and the related staff and facilities; and  • faculty with PhDs and a research focus but limited practical experience, even in key programs like business and other working-related professions. o • The majority of accredited colleges and universities continue to provide the bulk of their educational programming from September to mid-December and from mid-January to May. As a result, most full-time faculty members only teach during that limited period of time. o • While this structure serves the needs of the full-time 18- to 24-year-old student, it limits the educational opportunity for working adults who must delay their education for up to five months during these spring, summer, and winter breaks. o • Traditional universities and colleges are also limited in their ability to market to or provide the necessary customer service for working adult students because it requires the development of additional administrative and enrollment infrastructure. • 31 Traditional colleges and universities, born out of a centuries old academic model and tradition, have seen adult and continuing education as awkward institutional fits for their mission—ancillary, less rigorous, yet subtly necessary activities to serve their state or local population needs but not rooted in the institution’s core academic tradition. • 32 The UOP’s format since its inception has focused on working adult students by providing an accredited collegiate education that enables them to attend classes and complete class-work in a schedule and manner more convenient to the constraints their work life imposes on their ability to obtain a college or advanced degree. It may well be that proprietary schools such as the UOP have proved more adaptable, if not more creative, in responding to this 21st century, knowledge-economy adult student reality. THE PROPRIETARY (FOR-PROFIT) COLLEGE AND UNIVERSITY SECTOR • 33 Undergraduate enrollments in the United States increased by more than a third to 17.6 million in the first decade of the 21st century, with the most dramatic growth occurring at proprietary colleges. It was the fastest decade of growth since the 1970s. Proprietary colleges enrolled 10 percent of all undergraduates in 2010, up from 3 percent in 2000. Proprietary enrollments increased fivefold to 1.2 million at four-year colleges, and nearly doubled to 385,000 at two-year institutions, according to Jack Buckley, Commissioner, National Center for Education Statistics. The Chronicle of Higher Education says it is even higher—10 percent of all students enrolled full-time in degree-granting institutions, and rising by an average rate of 9 percent annually over the last 30 years. “We are seeing a shift” that has “created additional opportunities … (and) brought to light differences in how students pursue and pay for that education,” Buckley said, adding that higher education “may look quite different” in 2020, when enrollments are projected to reach 20 million.4 • 34 Thirty-five years ago, approximately 90,000 students attended proprietary colleges and universities. The sector was populated primarily by small, privately owned businesses; “mom and pop” enterprises that looked little like their traditional, four-year counterparts. The colleges—most started primarily in east coast cities like New York, Philadelphia, and Boston—taught skills for front-line jobs in high-demand fields, including business, health care, cosmetology, food, and secretarial services. They enrolled people that traditional higher education tended to ignore: working-class adults with children of their own who needed more skills to get better-paying jobs but couldn’t take time out to attend a traditional campus.5 • 35 Proprietary institutions maintain much of the same mission today, amid a market that has seen sweeping changes, now populated by over 3,000 proprietary institutions. Forty percent are owned by one of 13 large, publicly traded companies. Half of those institutions offer associate, bachelor, or professional degrees today, versus less than 10 percent having done so in 1990. Over 90 percent of students at proprietary institutions are now enrolled in degree programs. Interestingly, only about 30 percent attend part-time. As the sector expands, it is attracting students who might otherwise have attended community colleges or even four-year institutions. “They are clearly a threat for both public and private schools,” says Jim Scannell, president of the higher-education consulting group Scannell & Kurz, “especially for adult students returning to get a B.A. or going part time to get a master’s.”6 • 36 The NCES study entitled The Condition of Education 2011, offered these summary observations:7 o • Enrollments and the number of degrees conferred by proprietary institutions increased faster than in the nonprofit sector, which includes public and private universities. Proprietary institutions awarded 5 percent of all bachelor’s degrees in 2008–2009, and 10 percent of all master’s degrees. o • For-profit colleges were more likely to enroll full-time students 25 and older, and to enroll students in distance education such as online courses. Nearly one in five students (19 percent) attending proprietary four-year colleges were enrolled entirely in distance education. o • The average price of attendance, including tuition, books, and living costs, for students enrolled full-time for a full year was highest at proprietary colleges after average grants were factored in. Students at proprietary colleges paid $30,900 on average in 2007–2008, compared with $26,600 at private, nonprofit colleges and $15,600 at public institutions. o • Proprietary institutions spent an average $2,659 on instruction per student in 2008–2009, compared with $9,418 at public colleges and $15,289 at private nonprofits. They spent more per student ($9,101) than public institutions ($6,647) but less than privates ($14,118) on student services and other types of support, including administrative and marketing salaries. o • Among four-year colleges, retention and graduation rates were lower at proprietary schools, which enroll about 1.2 million students compared with their nonprofit counterparts, which enroll about 8.9 million students. o • Among two-year colleges, retention and graduation rates were higher at proprietary colleges, which enrolled 385,000 students, than at public community colleges, where enrollments reached 7.1 million. o • Students at proprietary colleges were more likely to take out larger loans and to default on them. The average annual loan amount for all students was $7,000; the average was $9,800 at four-year proprietary institutions and $7,800 at two-year proprietary institutions. • 37 Many small schools, particularly private liberal-arts colleges, are seeing drops in enrollment. After initially trying tuition increases as a solution, which has only driven students away in many cases, some of these schools are attempting to make up tuition revenue by increasing their adult student enrollment. In so doing, they are competing directly with proprietary colleges; and a recent trend has been for some of those colleges to be acquired by larger proprietary education companies as a way to enter certain geographic areas, or rebrand the small college, or leverage its brand across multiple locations. And public colleges feel the heat too. Students who have been rejected by budget-strapped public colleges, and others who find the public university bureaucracy often too much of a hassle to deal with, are being aggressively recruited by the proprietary sector. It’s not clear whether this shift of students from public institutions to proprietary universities will be permanent, industry analysts say, but it continues to increase the size and legitimacy of the proprietary sector.8 • 38 Amazingly, even while facing constant budget cuts, layoffs, dwindling state support, and turning students away, most professors and administrators at traditional public colleges and universities remain dismissive of proprietary colleges. Some see proprietary institutions as a second-class education; others as too costly, or consuming too much of federal student aid; and some even arrogantly see them as trivial wannabe sideshows amid the real business of research-based education. Increasingly though, thoughtful observers of traditional universities see folly in their leaders’ loyalty to a 200+ year-old model of higher education that has changed little, creating blinders for leaders of the typical public college or university. They point to the typical pattern where a two-year community college often evolves to seek accreditation as a four-year degree granting institution; and eventually, with proper political support, seeks to become an advanced degree-granting university institution with a larger “research” mission for the new faculty it starts to hire, and with appropriately credentialed expensive, additional in-state presidents, provosts, and chancellors, among other administrative layers. • 39 Critics often point out to the observation that at these traditional college and university campuses, the focus is foremost on the faculty members. Tenure, seniority, obsessive reliance on faculty committee-based decision-making, lengthy deliberation to alter a curriculum, or even whether or not a class typically offered on “Tu-Th” at 10 am could be offered on other days, or a Saturday, become serious, administratively intense issues. The application process, and time to a decision, can take months. It often is a tedious affair to talk with someone in the admissions process. Availability of classes, timing of required subjects, and accessibility of professors and/or advisors is often a concern cited by students at many traditional colleges and universities. • 40 Leading proprietary institutions tend to point out with pride that they take a different approach on some of these issues, which their advocates argue is born out of a core focus on “the student” as their customer, and what that student needs/seeks to accomplish in attending that school. Faculty members are not tenured, but rather are hired based on expertise, experience, and qualifications. They are retained based on student demand. Course timing is oriented toward accommodating the special scheduling needs of the student. Some proprietary institutions use block times and concentrate courses in those blocks. So, for example, where a traditional college student might have a class at 9 am, another at noon, and a third at 4 pm or 10 am the next day, the proprietary would set course offerings in four-hour blocks so students could get all classwork done in efficient timing sequences compatible with their work life. Others, following an approach pioneered by the University of Phoenix, let students concentrate on one or two courses maximum at a time. They last 5–6 weeks, include online or on-campus options, and allow students to concentrate their topical focus as well as the efficient use of their time. And it is not unusual to have early Saturday classes at several of these schools, because it is a convenient time for their student populations. Plus, classes start anew every month at most proprietary institutions, making availability and planning or sequencing courses very different from a traditional college or university. • 41 In admissions, the timetable at a proprietary is entirely different from its traditional counterpart. Expression of interest is quickly followed up, with that person to work with you to complete an application, figure out what program makes sense for you, and take you through the application process. Part of this activity has received considerable regulatory scrutiny in recent years as a pressure sales process. That sales process and the pressure to sign up new students versus the patient accuracy of the information provided by the “counselor” to the prospective student, to include financial aid information, has come under intense federal regulatory scrutiny in recent years. Nonetheless, the speed of attention to the inquiry from prospective students, and the effort to explain what is offered and the nature of the education process at a proprietary is typically in marked contrast to that process in a traditional college or university. CHALLENGES FACING THE PROPRIETARY EDUCATION PROVIDERS • 42 Speaking in a 2011 conference call with reporters, U.S. Secretary of Education Arne Duncan said of the proprietary education industry, “The quality here has been very uneven. There have been some absolute superstars. And there have been some players whose intentions, quite frankly, we doubt.” So other notable employers, such as Intel, have recently adopted policies in recruitment that eliminate employment consideration for graduates of most of the better known proprietary schools. Harkening back to the 50 percent rule in the early 1990s,9 recent regulatory changes have sought to address widespread growing concerns with this “quality” issue as well as others’ concern with the proprietary industry’s disproportionate reliance on federal student loans as a source of revenue used by its students to pay for their education at proprietary schools. Two regulations created by federal law have been put into place seeking, according to their supporters, to address these concerns—the gainful employment rule and the 90/10 rule. • 43 The Gainful Employment Rule. Set to take effect in July 2012, this rule will deny federal aid to programs that fail three “tests” of gainful employment three times in a four-year span: o • Are at least 35 percent of former students actively paying down their loans? The test: Do a third of ex-students make payments that lower their student loan balance by at least a dollar in a given year? o • Are graduates spending 30 percent or less of their discretionary income on loan payments? The test: Student loan payments are not costing too much of the money left after graduates pay for basic needs. (In other words, the proprietary’s education leads to a job paying sufficiently well so as to justify the costs to the students for which they took out student loans arranged by the school.) o • Are graduates spending 12 percent or less of their total income on loan payments? This test, related to the previous test, is another way based on total income which establishes that loan bills should not consume more than an amount regulators believe is the appropriate level of student loan costs after graduation—about an eighth of total earnings. • 44 Programs that pass any of the three tests would retain eligibility to participate in federal aid initiatives, enabling qualified students to secure federal grants or loans. The rule effectively would shut down proprietary programs that repeatedly fail to show, through measures associated with these three rules, that graduates are earning enough to pay down the loans taken out to attend those programs. Advocates say it addresses the chief complaint against proprietary schools that students emerge from them with too much debt and too little earning power. Proprietary defenders have aggressively opposed the measure, with lobbyists alleging the Education Department was unjustly swayed by short-sellers with a financial interest in seeing the publicly traded school operators suffer. They also say the rule will limit access to higher education, particularly for minorities. And, they argue it regulates them based on behavior and actions over which they have no control. A handful of lawsuits were quickly filed by numerous parties on issues related to the rule. • 45 The 90/10 Rule. This is a Higher Education Act rule that makes a proprietary institution of higher education ineligible to participate in Title IV (student loan) programs if for any two consecutive fiscal years it derives more than 90 percent of its cash basis revenue from Title IV programs. An institution that derives more than 90 percent of its revenue from Title IV programs for any single fiscal year will be automatically placed on provisional certification for two fiscal years and will be subject to possible additional sanctions determined to be appropriate under the circumstances by the U.S. Department of Education in the exercise of its broad discretion. An institution that derives more than 90 percent of its revenue from Title IV programs for two consecutive fiscal years will be ineligible to participate in Title IV programs for at least two fiscal years. • 46 Proponents of the 90/10 rule see it as a way to ensure quality and discourage fraud at proprietary colleges by requiring students to invest some of their own money in tuition, just as homebuyers make down payments on their mortgages. Opponents argue that it penalizes low-income recipients that do not have the savings or family income to pay educational costs without receiving a full loan. Traditional universities increasingly argue that proprietary institutions are taking a disproportionate share of the student loan funds. • 47 Proprietary colleges as a whole were approaching the 90 percent cap in 2012 as the Education Department has increased the availability of student loans and Pell Grants, according to Harris Miller, president of the Association of Private Sector Colleges & Universities, a Washington-based trade group. He argued that Congress needs to act so the schools can continue to operate and students can stay in class. Industry leader University of Phoenix sent out an e-mail saying it “believes 90/10 is not a good measure of quality, which is better assessed through graduation rates, default rates, compliance audits, financial ratios, etc.” The UOP reported that federal student grants and loans made up almost 88 percent of the college’s revenue in its 2011 fiscal year. • 48 Student Loan Defaults—Student Loan Cohort Default Rate Rule. To remain eligible to participate in Title IV programs, educational institutions must maintain student loan cohort default rates below specified levels. Each cohort is the group of students who first enter into student loan repayment during a federal fiscal year (ending September 30). Under the Higher Education Act, as reauthorized, the currently applicable cohort default rate for each cohort is the percentage of the students in the cohort who default on their student loans prior to the end of the following two federal fiscal years, which represents a three-year measuring period. • 49 Beginning with the 2011 three-year cohort default rate published in September 2014, the three-year rates will be applied for purposes of measuring compliance with the requirements as follows: o • Annual test. If the 2011 three-year cohort default rate exceeds 40 percent, the institution will cease to be eligible to participate in Title IV programs; and • 50 A Pending Student Loan Crisis? A growing concern that “echoes” as background with these rules is the dramatically increasing level of student debt in the United States. Entering 2011, total student loan debt, at $830 billion, exceeded total U.S. credit card debt, itself bloated to what some call a bubble level of $827 billion. Student loan debt was estimated to be growing at the rate of $90 billion a year. The younger generation appears to have begun to mortgage its future earnings in the form of student loan debt. And student loans are not dischargeable in bankruptcy—meaning future wages, tax refunds, and so forth can be garnished to recoup these obligations. Only 40 percent of that student debt is actively being repaid. The rest is in default, or in deferment (when a student requests temporary postponement of payment because of economic hardship), which means payments and interest are halted, or in forbearance. Interest on government loans is suspended during deferment, but continues to accrue on private loans. As tuitions increase, loan amounts increase; private loan interest rates reached highs of 20 percent in 2011. Among the top private lenders: Citigroup, Wells Fargo, and JPMorgan Chase.10 Recent statistics indicate that student debt was held by 62 percent of students from public universities, 72 percent from private nonprofit schools, and a whopping 96 percent from private proprietary schools. • 51 It Is, After All, “Proprietary.” Whatever one’s opinion of the proprietary university model, “it’s been a tremendous growth story,” says Jeffrey M. Silber, a stock analyst and managing director of BMO Capital Markets, which figures the proprietary sector brought in $30 billion in 2011. Most of that was earned by 13 large publicly traded companies that now dominate the market. • 52 The biggest player among those is the Apollo Group. Its flagship University of Phoenix has morphed from an institution with 25,100 students in 1995 to one with over 550,000 today. That means that 25 years ago Phoenix was about the same size as George Washington University. Now it is larger than the entire undergraduate enrollment of the Big Ten.11 Phoenix’s enrollment dwarfs that of each of the other 12 publicly traded companies, including Education Management Corporation, with over 160,000 students; American Public Education, Inc. with over 130,000 students; Career Education Corporation, with about 118,000 students; and DeVry Inc., with 116,000 students. While Kaplan Higher Education is one of the country’s largest proprietary companies, with approximately 110,000 students, it is owned by the Washington Post Company and so is not one of the 13 large publicly traded proprietary universities. The proprietary sector is not only more robust than the rest of higher education, it is helping to force some changes in the way traditional colleges do business. Yet while some traditional colleges are reaching out to adult students, starting online programs, and saving money by rejecting tenure in favor of hiring professors by the class, traditional higher education characteristically remains far from being nimble and quick to change. It has been operating in roughly the same way for hundreds of years, so by its very nature it may continue to be ill-suited to respond to competition from the proprietary sector. The Apollo Group’s leadership put it this way in 2011 amidst the growing scrutiny of the proprietary sector’s offerings, value, and reliance on student loans:12 o These factors—a greater number of individuals now wanting to pursue a college degree and students having a higher number of risk factors—are placing burdens on a higher education system that was not built to accommodate the needs of nontraditional students. The higher education system must significantly expand capacity to reach greater numbers of students and provide a higher level of academic and student support services in order to successfully educate nontraditional students. o These burdens come at a time when public funding for higher education is under pressure and budgets and capacity are being cut at traditional schools. Delivering quality education at traditional institutions generally relies upon a high fixed-cost, ground-based system of learning, and whether by design, or due to resource constraints, the traditional higher education system is rigid and inflexible. As such, the economics underlying the traditional university system’s asset-intensive, high cost structure have been essentially unchanged over time. THE APOLLO GROUP, INC. • 53 Apollo Group, Inc. is one of the world’s largest private education providers and has been in the education business for almost 40 years. Echoing a president’s speech and the role it views itself as playing as an innovator for nontraditional students (73 percent of all U.S. college student candidates, it believes) in today’s global economy, the Apollo Group’s Annual Report released in 2011 had this interesting statement toward the front of the document: Traditional colleges and universities are the backbone of the U.S. higher education system, but they alone cannot meet the country’s needs. This system, which is exclusive by design, was built to meet the needs of a different era when only a small portion of the nation’s workforce needed a college degree. Today’s globally competitive, knowledge-based economy requires a more broadly educated society. We believe innovation and new alternatives are required to adapt to our rapidly changing world. Accredited, degree-granting proprietary [meaning “proprietary”] institutions play a critical role in the future of education …. Apollo Group is committed to leading the way in meeting the evolving needs of millions of nontraditional learners and producing graduates necessary to achieve the world’s collective educational goals. • 54 The Apollo Groups schools, led by the University of Phoenix (UOP), served a student enrollment exceeding 550,000 in 2011. Apollo Group provides educational programs and services both online and on-campus at the undergraduate, master, and doctoral levels through wholly-owned subsidiaries: o • The University of Phoenix, Inc. (UOP)—the largest private university in the United States, and source of over 91 percent of the Apollo Group’s revenue. o • Institute for Professional Development—provides adult education program development, administration, and management consulting services to private U.S. colleges and universities. o • The College for Financial Planning Institutes—one of the nation’s leading providers of financial services education and certification for individuals and corporations in the financial services industry. o • Meritus University—offers degree programs online to working learners throughout Canada. • 55 In addition, Apollo Group formed a joint venture with The Carlyle Group in late 2007 called Apollo Global, Inc., to pursue investments in the international education services industry. Apollo Group owns 86 percent of Apollo Global; Carlyle owns the remaining 14 percent. Consolidated into the Apollo Group’s financial statements, Apollo Global currently operates the following educational institutions: o • BPP Holdings in the United Kingdom. o • Western International University in the China, India, and the Netherlands. o • Universidad de Artes, Ciencias y Comunicación in Chile. o • Universidad Latinoamericana in Mexico. • 56 Revenue at the Apollo Group doubled during the last five fiscal years as follows: • 57 Apollo Group executives gave a hint of a global focus when they said in a recent letter to shareholders: We are committed to strengthening and capitalizing on Apollo Group’s position as a leading provider of high quality, accessible education for individuals around the world. This means putting the student first as we focus on academic quality and the student experience. To that end, we are intensely focused on leveraging our core capabilities and expertise—developed over our 35-plus year history—to, first and foremost, maximize the long-term value of University of Phoenix, which is our top investment priority for Apollo Group, and then, to expand intelligently beyond University of Phoenix. • 58 It would appear that, over time, Apollo Global will become the organizational mechanism to take all that is known and learned from the University of Phoenix truly global, in due time. For the University of Phoenix, Apollo executives translated this vision into three priorities: o 1. Growing the UOP the right way by identifying and attracting students who are willing to put in the effort to succeed and who UOP believes can benefit from UOP programs. o 2. Delivering a high-value, energizing and compelling learning experience for UOP students through quality, convenience, relevant academic programs, innovative content delivery, engaging instruction, and student-centric services and protections. o 3. Increasing the efficiency of UOP operations via scalability and process innovation. • 59 They add that the fundamental Apollo Group strategic plan emphasizes two core themes: o 1. Maximize the value of the core UOP business, and o 2. Expand intelligently beyond the UOP. THE UNIVERSITY OF PHOENIX STRATEGY • 60 The UOP’s 2007 strategic plan prioritized six core “strategies.” UOP’s plan heading into 2012 is noticeably different in the core strategies it emphasizes in its 10-K and other key documents. • 61 The 2007 plan highlighted six key elements in order of priority: o 1. Establish New UOP Campuses and Learning Centers—be in every state and every major U.S. metro area. o 2. International Expansion—accommodate working adults abroad that want a U.S. education without the hassle of coming to the United States. o 3. Enhance Existing Educational Programs—add more accredited degree programs, increase pedagogical/instructional excellence, and keep tuition down. o 4. Expand the Types of Educational Programs—master’s and doctoral programs. o 5. Serve a Broader Student Age Group—by targeting the 18–23-year-old group. o 6. Market Aggressively—spend over 20 percent of revenue [~$600,000] on intensive marketing to build enrollments to in turn build revenue growth.13 • 62 The results from that strategic plan were impressive. UOP revenues grew 150 percent from just over $2B in 2006 to virtually $5B in 2010. And that included the Great Recession of 2008–2009. • 63 The UOP’s 2011 strategic plan for the next five years was remarkably different in order of priority and emphasis. Key elements of that strategic plan in presumed order of priority as outlined in 2011 were, all echoing a UOP theme of “transitioning the UOP to more effectively support our students and improve their educational outcomes”: o 1. Student Education Financing Decisions—Adopt new tools to better support students’ educational financing decisions in enrolling and staying at the UOP. Emphasize the new UOP’s Responsible Borrowing Calculator, and help prospective and current students use it to help them calculate the amount of student borrowing necessary to achieve their educational objectives; and to not incur unnecessary student loan debt. o 2. Responsible Target Marketing—Transition the UOP marketing approaches to more effectively identify students who have the ability to succeed in UOP educational programs, including reduced emphasis on the use of third parties for lead generation. o 3. Improved New Student Orientation—Require all students who enroll in UOP with fewer than 24 incoming credits to first attend a free, three-week University Orientation program designed to help the inexperienced prospective student understand the rigors of higher education prior to enrollment. o 4. Prioritize Student Success over Financial Incentives in Employees’ Compensation—Better align UOP enrollment, admissions, and other employees to UOP students’ success by redefining roles and responsibilities, resetting individual objectives and measures, and implementing new compensation structures, including eliminating factors in UOP admissions personnel compensation structures. o 5. Upgrading UOP Learning and Data Platforms—Continue to improve online learning platforms and e-pedagogies; and ensure state-of-the-art computer equipment and operational software to continuously enhance the student experience online and on-campus. All class materials are delivered electronically, making both its online and on-campus consistent, easy to use, and up-to-date electronic educational services. • 64 Commenting in 2011 on these five somewhat new, key elements of the UOP’s 2015 strategy, Apollo executives offered the following: We believe that the changes in our marketing approaches and the University Orientation pilot program implemented during FY 2010 contributed to the 9.8% reduction in University of Phoenix New Degreed Enrollment in the fourth quarter of FY 2010 compared to the fourth quarter of the previous year. We expect that the continuing changes in our marketing approaches and the implementation of the additional initiatives described above will significantly reduce fiscal year 2011 University of Phoenix New Degreed Enrollment and will adversely impact our net revenue, operating income and cash flow. However, we believe that these efforts are in the best interests of our students and, over the long-term, will improve student persistence and completion rates, reduce bad debt expense, reduce the risks to our business associated with our regulatory environment, and position us for more stable long-term growth in the future.14 • 65 Other elements of UOP’s previous strategy remain a part of its strategic agenda toward 2015. The difference would seem to be in emphasis, focus, and/or scope. o 6. Selectively Establish New Locations and/or Learning Centers—UOP is now in 40 states and virtually all major U.S. metro areas. It is within 10 miles of 87 million Americans. So UOP’s need for aggressively seeking new locations has passed. Plus, it is now an online leader, with a proprietary online learning system, small online classes, mandatory participation requirements for faculty and students, and flexibility to attend both online and on-campus class sessions. Its aggressive growth and purchasing of new locations in areas targeted for growth is no longer critical to its growth, or survival. o 7. International Expansion—UOP will play an eventual essential role in partnership with the new Apollo Global developing the capabilities to take the UOP-proven approaches to comprehensive postsecondary education global. This strategic element appears to be emerging as the key vector for the Apollo Group’s long-term growth. Executives had this comment about international expansion, which they appear to be approaching cautiously, and with an appreciation for local market considerations and customs: We believe we can capitalize on opportunities to utilize our core expertise and organizational capabilities to grow in areas outside of UOP’s current markets, both domestically and internationally. In particular, we have observed a growing demand for high quality postsecondary and other education services outside of the U.S., including in Europe, Latin America and Asia, and we believe that we have the capabilities and expertise to provide these services beyond our current reach. We intend to actively pursue quality opportunities to partner with or acquire existing institutions of higher learning where we believe we can achieve attractive long-term growth and value creation.15 • 66 UOP has as the assumption guiding its increased emphasis on preparing for global expansion that proprietary education is playing an important role in advancing the development of education, specifically higher education and lifelong learning, in many countries around the world. While primary and secondary education outside the United States are still funded mainly through government expenditures, postsecondary education outside the United States is experiencing governmental funding constraints that create opportunities for a broader proprietary sector role. UOP and Apollo executives cite several trends driving their international market optimism: o • Unmet demand for education. o • Insufficient public funding to meet demand for education. o • Shortcomings in the quality of higher education offerings, resulting in the rise of supplemental training to meet industry demands in the developing world. o • Worldwide appreciation of the importance that knowledge plays in economic progress. o • Globalization of education. o • Increased availability and role of technology in education, broadening the accessibility and reach of education. • 8. Make UOP a Comprehensive University Based on Accredited Degrees Offered—The quality and comprehensiveness of UOP’s degree offerings are critical to further establishing it as the “gold standard” among proprietary universities, and all universities, in order to allow it to deal with and separate itself from perceived low-quality and “lite” offerings that plague the industry. UOP now offers degrees in the follow program areas, all accredited: • 67 This breadth of accredited offerings makes the UOP, degree-wise, the equal of virtually any traditional comprehensive public or private, nonprofit university. o 9. Emphasize Input from Employers of UOP Students—The UOP has long placed an emphasis on maintaining a close relationship with employers of its students. They are solicited for curriculum input; for project-type issues and problems, which can be used to have coursework in appropriate classes include student teams working on current, relevant applications of topics and course content they are covering. These relationships with major global employers have led to pedagogical innovations, like UOP’s “Virtual Organizations.” Created by subject matter experts and relevant professionals, six composite businesses, schools, health care, and government organizations provide virtual settings that allow students and their instructors to immerse themselves inside virtual real-world settings. These settings provide a more realistic form of • 68 Employer closeness also helps financially, since over 60 percent of UOP’s working students have historically had some level of tuition assistance from their employers. And it typically helps manage course timing and scheduling issues. UNIVERSITY OF PHOENIX STUDENT DEMOGRAPHICS 69 As noted previously, a majority of UOP’s students have been working adults employed full-time, and having been on the job at least six years. Some characteristics of UOP’s student population over the last five years are shown below: FINANCIAL PICTURE FOR THE APOLLO GROUP AND THE UNIVERSITY OF PHOENIX • 70 A consolidated summary of the Apollo Group’s business for the last five years is as follows: • 71 Components of Net Revenue were as follows over those five years and in FY2005: • 72 Total revenues from Title IV funding were as follows over the 2005–2007 time period: • 73 While a similar table was not provided in their most recent annual report, the Apollo Group noted in their FY2010 Annual Report the following information regarding the percentage of revenue coming from Title IV and Pell Grant programs as a percent of total tuition revenue: The 90/10 Rule percentage for University of Phoenix [meaning Title IV funding as a percentage of total revenue] has increased materially over the past several fiscal years and UOP leaders expect further increases in the near term. These increases are primarily attributable to the following factors: o • Increased student loan limits. The Student Loans Act of 2008 increased the annual loan limits on federal unsubsidized student loans by $2,000 for the majority of our students enrolled in associate’s and bachelor’s degree programs, and also increased the aggregate loan limits (over the course of a student’s education) on total federal student loans for certain students. This in-turn increased the amount of Title IV program funds used by our students to pay tuition, fees and other costs; which has increased the proportion of our revenue from Title IV programs. o • Increase in Pell Grants. The eligibility for and maximum amount of Pell Grants have increased in each of the past three years. These changes further increase the Title IV funds available used by our students to pay tuition, fees and other costs, which, in turn, has further increased the proportion of our revenue deemed to be from Title IV programs. The Higher Education Opportunity Act provides temporary relief from the impact of the loan limit increases by excluding from the 90/10 Rule calculation any amounts received between July 1, 2008 and June 30, 2011 that are attributable to the increased annual loan limits. The UOP refers to this as the “LLI relief.” The following table details the 90/10 Rule percentages for University of Phoenix and Western International University, as well as the percentages for University of Phoenix with the LLI relief, for fiscal years 2010 and 2009: • 74 Looking toward 2011 and beyond, they further said: Based on currently available information, we expect that the 90/10 Rule percentage for University of Phoenix, net of the LLI relief, will approach 90% for fiscal year 2011 … we believe that, absent a change in recent trends or the implementation of additional effective measures to reduce the percentage, the 90/10 Rule percentage for University of Phoenix is likely to exceed 90% in fiscal year 2012 due to the expiration of the LLI relief in July 2011.16 • 75 The other way this student loan derived revenue creates a potential problem involves loan defaults as was discussed earlier in this case, called the “cohort default rate.” If an institution’s two year cohort default rate exceeds 25% for three consecutive years, it will become ineligible to participate in Title IV programs. Apollo’s two-year cohort default rates as of FY2010 were: • 76 Apollo Group said in this regard: The University of Phoenix cohort default rates have been increasing over the past several years. We expect this upward trend to intensify due to the current challenging economic climate and the continuing effect of the historical growth in our associate’s degree student population. Consistent with this, the available preliminary data for the University of Phoenix 2009 cohort reflect a substantially higher default rate than the 2008 cohort, although we do not expect the rate to exceed 25%.17 • 77 Related, the FY2010 Annual Report has this footnote to its balance sheet about allowances for doubtful accounts receivable: Note 6. Accounts Receivable, Net Accounts receivable, net consist of the following as of August 31: Accounts receivable, net consist of the following as of August 31: Student accounts receivable is composed primarily of amounts due related to tuition. • 78 These numbers identify a large, and growing doubtful amount of tuition revenue will be collected for services provided in FY2009 and FY2010. That situation appears to be common across the Title IV loan program, which in turn is drawing regulatory attention to it. Fears of another credit bubble have been raised. A generation that has grown up adding this debt to their financial picture just as they begin their adult life is acutely aware of the seriousness of the obligation to repay those loans, especially when they start working and begin paying their loan payments. The feature of these loans that has them excluded from bankruptcy protection further reinforces that burden. And interest rates on delinquent and/or unmade payments, particularly from private loan providers, can rival the levels on higher interest credit cards. All of this makes the issue of defaults and the regulatory CDRs or cohort default rates a major issue industrywide and for the country as a whole. • 79 Apollo/UOP’s costs as a percent of revenue were as follows over the last six years: Fiscal Year 2009 Compared to Fiscal Year 2008 Analysis of Consolidated Statements of Income • 73 While a similar table was not provided in their most recent annual report, the Apollo Group noted in their FY2010 Annual Report the following information regarding the percentage of revenue coming from Title IV and Pell Grant programs as a percent of total tuition revenue: The 90/10 Rule percentage for University of Phoenix [meaning Title IV funding as a percentage of total revenue] has increased materially over the past several fiscal years and UOP leaders expect further increases in the near term. These increases are primarily attributable to the following factors: o • Increased student loan limits. The Student Loans Act of 2008 increased the annual loan limits on federal unsubsidized student loans by $2,000 for the majority of our students enrolled in associate’s and bachelor’s degree programs, and also increased the aggregate loan limits (over the course of a student’s education) on total federal student loans for certain students. This in-turn increased the amount of Title IV program funds used by our students to pay tuition, fees and other costs; which has increased the proportion of our revenue from Title IV programs. o • Increase in Pell Grants. The eligibility for and maximum amount of Pell Grants have increased in each of the past three years. These changes further increase the Title IV funds available used by our students to pay tuition, fees and other costs, which, in turn, has further increased the proportion of our revenue deemed to be from Title IV programs. The Higher Education Opportunity Act provides temporary relief from the impact of the loan limit increases by excluding from the 90/10 Rule calculation any amounts received between July 1, 2008 and June 30, 2011 that are attributable to the increased annual loan limits. The UOP refers to this as the “LLI relief.” The following table details the 90/10 Rule percentages for University of Phoenix and Western International University, as well as the percentages for University of Phoenix with the LLI relief, for fiscal years 2010 and 2009: • 74 Looking toward 2011 and beyond, they further said: Based on currently available information, we expect that the 90/10 Rule percentage for University of Phoenix, net of the LLI relief, will approach 90% for fiscal year 2011 … we believe that, absent a change in recent trends or the implementation of additional effective measures to reduce the percentage, the 90/10 Rule percentage for University of Phoenix is likely to exceed 90% in fiscal year 2012 due to the expiration of the LLI relief in July 2011.16 • 75 The other way this student loan derived revenue creates a potential problem involves loan defaults as was discussed earlier in this case, called the “cohort default rate.” If an institution’s two year cohort default rate exceeds 25% for three consecutive years, it will become ineligible to participate in Title IV programs. Apollo’s two-year cohort default rates as of FY2010 were: • 76 Apollo Group said in this regard: The University of Phoenix cohort default rates have been increasing over the past several years. We expect this upward trend to intensify due to the current challenging economic climate and the continuing effect of the historical growth in our associate’s degree student population. Consistent with this, the available preliminary data for the University of Phoenix 2009 cohort reflect a substantially higher default rate than the 2008 cohort, although we do not expect the rate to exceed 25%.17 • 77 Related, the FY2010 Annual Report has this footnote to its balance sheet about allowances for doubtful accounts receivable: Note 6. Accounts Receivable, Net Accounts receivable, net consist of the following as of August 31: Accounts receivable, net consist of the following as of August 31: Student accounts receivable is composed primarily of amounts due related to tuition. • 78 These numbers identify a large, and growing doubtful amount of tuition revenue will be collected for services provided in FY2009 and FY2010. That situation appears to be common across the Title IV loan program, which in turn is drawing regulatory attention to it. Fears of another credit bubble have been raised. A generation that has grown up adding this debt to their financial picture just as they begin their adult life is acutely aware of the seriousness of the obligation to repay those loans, especially when they start working and begin paying their loan payments. The feature of these loans that has them excluded from bankruptcy protection further reinforces that burden. And interest rates on delinquent and/or unmade payments, particularly from private loan providers, can rival the levels on higher interest credit cards. All of this makes the issue of defaults and the regulatory CDRs or cohort default rates a major issue industrywide and for the country as a whole. • 79 Apollo/UOP’s costs as a percent of revenue were as follows over the last six years: Fiscal Year 2009 Compared to Fiscal Year 2008 Analysis of Consolidated Statements of Income •