The University Of Phoenix Wants Its Reputation Back

Charlie Riedel / AP

Apollo Education, the owner of the University of Phoenix, told wary investors Monday that it would try, once again, to "transform" the country's largest for-profit college chain. The announcement came after the company reported another dismal financial quarter, and two days before the Obama administration's potentially damaging industry regulations are set to go into effect.

The goal, Apollo CEO Greg Cappelli said in an earnings call, is to "repair the reputation of the University of Phoenix," scaling it back in size and cutting some of its worst-performing programs. Enrollments at the university fell by 14% in its most recent quarter.

The transformation plan is one of several the university has rolled out over the years in an an attempt to curb declining enrollments. So far, few have been successful.

"We've tried a lot of things to turn things around, and it hasn't gone to the level we thought it would," Capelli said on the call. "So we're taking next steps."

Apollo stock slid 5% in anticipation of the company's earnings. It was down another 5% in after-hours trading Monday.

The company said it would embark on a "period of transformation" that, in the short term, is likely to further drive down revenue and enrollments. But the plan, the it said, will increase graduation rates and drive down the high loan default levels that have long plagued the for-profit college industry.

At its peak five years ago, Phoenix had some 460,000 students and a soaring stock price. The company is also facing an unprecedented regulatory environment, with a "gainful employment" regulation set to go into effect Wednesday that the company said in its earnings report is likely to affect some of its programs.

Apollo plans to introduce admissions criteria and diagnostic tests, no longer enrolling every student that comes to the school's doors. It will stop letting students start every week, close some campuses, and to cut back on associate's degree programs. Such programs are among its worst-performing, and the most likely to be hit by gainful employment regulations, which will cut federal financial aid for programs that graduate students with high debt loads and low earnings.

On the earnings call, analysts seemed wary of the parts of Apollo's plan that are likely to involve reduce enrollment, eventually leaving the university with around 150,000 students. Every student the school chooses not to enroll is revenue, primarily via federal loans, left on the table

"We know there's short-term consequences to doing this," Capelli said. "We want our reputation back, like we used to have, as a university that has high outcomes."

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