Here is the disclosure in Apollo Group's 10-Q (Interestingly, this was one of eight pending litigation and settlement items in their 10-Q; the legal team must be busy!)
Student Loan Class Action
Here are some of the recent news items about this class action suit:
Here is Piper-Jaffray's take on the situation:
- Commenting on management's response, Piper said, "Little was gleaned from our conversation with Apollo management yesterday as to the basis of the complaint. Management indicated it continues to adhere to the same strict formula for disbursement of Title IV funds as it has over the past several years. The company would not comment on any specifics of the proposed class action. Furthermore, the 10Q states the company has not accrued a liability associated with the complaint and intends to "vigorously oppose plaintiffs' allegations"
The Chronicle of Higher Education provided the crux of the lawsuit in this article today:
According to the lawsuit, which was filed last month in the U.S. District Court in Little Rock, Ark., the university "effectively pays off" the loans of students who withdraw from the institution, then demands repayment from those students under terms more onerous than those of the original federally guaranteed loans.
By canceling those students' federal-loan debt, the suit argues, the university prevents those loans from being considered in its official default rate and keeps its rate from suffering.
But "the decision to cancel the loan is for the student to make," the lawsuit asserts, and the company has no right to interfere with the contracts students have made with their lenders.
The University of Phoenix reported the following cohort default rates, based on data gleaned from the Department of Education site:
- 2004: 7.5%
- 2005: 7.3%
- 2006: 7.2%
This is below the rate for proprietary schools overall, which was 9.7% in 2006, according to the Department of Education.