Apollo Group (University of Phoenix) Comments on Obama Proposal

Here are two takeaways from this filing:  Apollo Group (University of Phoenix) will be developoing capability to participate in DL for limited portion of federal student loans in 2009 and expect to be able to fully transition to DL by July 1, 2010 phaseout.  University of Phoenix is the largest borrower of FFELP loans; their students took out $3.76 billion of loans in 2007-08, based on Department of Education information. 

Here is the excerpt from their 10-Q filing today:

Approximately 77% of our fiscal year 2008 net revenue was derived from receipt of Title IV funds, principally student loans made under the Federal Family Education Loan Program (FFELP) and Pell Grants. FFELP loans are originated, held and serviced by private financial institutions and are guaranteed by the federal government. In addition to FFELP loans, the Department of Education also administers the Federal Direct Loan Program (FDLP), which eliminates the private financial institution as the lender. Under the FDLP, the federal government makes the loans directly to the students. We do not currently participate in the FDLP. However, we are developing the capability to participate in the FDLP in fiscal year 2009 for a limited portion of our Title IV loans.

In the Obama Administration’s 2010 budget request delivered to Congress on February 26, 2009, the Department of Education proposed to eliminate FFELP loans and instead require all Title IV student loans to be administered through the FDLP commencing July 1, 2010. We expect to be able to fully transition from the FFELP program to the FDLP by the proposed July 1, 2010 phase-out date, if necessary. If this proposal is adopted, the transition would require us to develop and implement administrative capabilities and procedures for volume processing of loans under the FDLP. If we experience a disruption in our ability to process student loans through the FDLP, either because of administrative challenges on our part or the inability of the Department of Education to process the substantial increase in direct loans, our results of operations and cash flows could be adversely and materially affected.