.!!!!

lJeron, David
From: Eisman, Steven [seisman@fppartners.com]
Sent: Friday, May 28,20109:22 AM
To: jkvall@who.eop.gov; Bergeron, David
Subject: New analysis
Attachments: image001.gif; ED_GE MATRIX_2.xls

Dear James and David,

I have new piece of analysis that I thought you would find helpful. I have been hearing that the Dept of ED is considering
adjusting the gainful employment metrics in response to the industry backlash against the proposal. I cannot stress
enough how critically important choosing the right metrics are to enact the intended outcomes, and how changing the key
metrics (specifically the debt service % and the repayment period) drastically affects the intended results. In certain
combinations, many of the most expensive schools will actually be able to raise tuition. I don't believe this is the intended
outcome.

Attached is the spreadsheet we have put together lookingatvariousscenarios for gainful employment. I have included a
. snapshot below of the average annual tuition impact for 5 major for~profit schools based on various combinations. As you
will see by our analysis, under a 10% GE ratio and a 15-yr repayment period, many schools will be able to raise tuition by
4%, and moving to a 20-yr repayment provides a much larger opportunity.

This debate has nothing to do with "access" - it has everything to do with revenue-per-student (and thus, proflt~perp
student), and that is why the industry is fighting so hard to loosen the metrics. I just want to ensure that the key decislon~
makers are aware of how sensitive the outcomes are to these metrics. In our opinion, if the Department were to move
substantially away from the initial combination (8% and 1O-yr repayment), that it would be better off to have no gainful
employment rule at all, since it will resu.lt in no changes aithE;! sChools and no reduction in student's debt loads.

Thanks,
Steve

5 COrvPANY AVERAGE

Gajnful Implp,menJlcmlriAI

I' rllig 10% [lltip

10 -vr replIWment
Dela from currell1 cos:l

15 -If rePlIWmenl
DaDa from currentc:osl

20 -yr rePlIVment
DaDa from currellt cosl

Steven Eisman
FrontPoint Financial Services Fund
917p934~1770
seisman@fppartners.com

1
.!!!!:sera", David
From: Yuan, Georgia
Sent: Friday, May 28, 2010 4:05 PM
To: . Bergeron, David; Madzelan, Dan; Finley, Steve
Subject: FW: For-profit education industry .
Attachments: EismanSohnConference.doc; ED Presentation_SOHN.PPT; ED_GE MATRIX_2.xls

FYI -this just came to us. I did receive it directly.

Georgia
From: Martin) Carmel
Sent: Friday, May 28, 2818 3:58 PM
To: Miller, Tony; Rogers) Margot; Cunningham) Peter; Rose) Charlie; Kanter, Martha; Gomez,
Gabriella; Shireman, Bob; Yuan, Georgia
Cc: Duran, Maribel
Subject: FW: For-profit education industry
FYI. You may have gotten directly but just in case. P 11 take a look to see if any of it is
worth asking Maribel to give to Arne.

From: Eisman) Steven fmailto:seisman@fppartners.comJ

Sent: Friday) May 28, 2818 3:14 PM
Subject: For-profit education industry
Hello,

My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial
Services fund. I wanted to inform you that I recently spoke at the Ira Sohn conference in.
New York and my topic was the for-profit education industry. My presentation was very
negative and I wanted to bring to your attention many of the unsaid or unknown aspects of
this industry. We have been researching for-profit schools for over a year now and are very
familiar with every part of these businesses. Attached are the speech I gave and the
presentation that was shared.

I have also attached a recent analysis we completed on the gainful employment proposal being
reviewed currently. Our purpose in the analysis is merely to raise awareness on the how
critically important choosing the right metrics is to enact th~ intended 6utcomes. Our
analysis highlights how changing the key metrics (specifically the debt service % and the
repayment period) drastically affects the intended results. For example, while many schools
will have to lower tuition (resulting in lower student debt levels) under the proposed 8%
debt service ratio and 18-yr repayment) under a 18% ratio and a 15-yr repayment period, many
schools will actually be able to raise tuition by 5% or more. Moving to a 28-yr repayment
with 18% ratio provides a much larger opportunity for nearly every school we've followed to
raise tuition substantially (in some cases by 28% or more) .. While I don't claim to know the
Administration's ultimate objectives, I don't believe raising student debt levels through
higher tuition is the intended outcome of the proposed regulation.
let me be clear - the debate on gainful employment has nothing to do with ttstudent access".
It has everything to do with revenue-per-student (and thus, profit-per-student) for these
schools, and that is why the for-profit industry is fighting so hard to loosen the metrics. I
just want to ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion,.if the Administration were to move substantially away from
the initial combination (8% ratio and a18:-yrrepayment period):, then it would be better off
to have no gainful employment rule at C1U, since a diluted version will likely result in no
changes at the schools and no reduction in student's debt loads.
1
Should you have any questions on any of the information provided, I am available to discuss
any of our findings or assumptions.

Steven Eisman
FrontPoint Financial Services Fund
917-934-1778
seisman@fppartners.com

2
~eron, David

From: Yuan, Georgia

Sent: Friday, May 28,20104:05 PM
To: Bergeron, David; Madzelan, Dan; Finley, Steve
SUbject: FW: For-profit education industry . .
Attachments: EismanSohnConference.doc; ED Presentation_SOHN.PPT; ED_GE MATRIX_2.xls

FYI - this just came to us. I did receive it directly.

Georgia
From: Martin, Carmel
Sent: Friday, May 28, 2010 3:50 PM
To: Miller, Tony; Rogers, Margot; Cunningham, Peter; Rose, Charlie; Kanter, Martha; Gomez,
Gabriella; Shireman J Bob; Yuan, Georgia
Cc~ Duran J Maribel .
Subject: FW: For-profit education industry
FYI. You may have gotten directly but just in case. IJll take a look to see if any of it is
worth asking Maribel to give to Arne.
From: Eisman, Steven [mailto:seisman@fppartners.com]
Sent: FridayJMay 28J 2010 3: 14 PM .
Subject: For-profit education industry

Hello J
My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial
Services fund. I wanted to inform you that I recently spoke at the Ira Sohn conference in
New York and my topic was the for-profit education industry. My presentation was very
negative and I wanted to bring to your at1;ention many of the unsaid or unknown aspects of
this industry. We have been researching for-profit schools for over a year now and are very
familiar with every part of these businesses. Attached are the speech I gave and the
presentation that was shared.
I have also attached a recent analysis we completed on the gainful employment proposal being
reviewed currently. Our purpose in the analysis is merely to raise awareness on the how
. critically important choosing the right metrics is to enact the intended outcomes. Our
analysis highlights how changing the key metrics (specifically the debt service % and the
repayment period) drastically affects the intended results. For example, while many schools
will have to lower tuition (resul,ting in lower student debt levels) under the proposed 8%
debt service ratio and 10-yr repayment J under a 10% ratio and a 15-yr repayment period J many
schools will actually be able to raise tuition by 5% or.more. Moving to a 20-yr repayment
with 10% ratio provides a much larger opportunity for nearly every school we've followed to
raise tuition substantially (in some cases by 20% or more). While I donJt claim to know the
AdministrationJs ultimate objectives J I don't believe raising student debt levels through
higher tuition is the intended outcome of the proposed regulation.
Let me be clear -the debate on gainful employment has nothing to do with "student access".
It has everything to do with revenue";per-student (and thus, profit-per-student) for these
schools, and that is why the for-profit industry is fighting so hard to loosen the metrics. I
just want to ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion, if the Administration were to move substantially away from
the initial combination (8% ratio and a 10-yr repayment period), then it would be better off
to have no gainful employment rule at all, since a diluted version will likely result in no
changes at the schools and no reduction in student's debt loads.
1···
Should you have any questions on ~ny of the information provided, I am available to discuss
any of our findings or assumptions.

Steven Eisman
FrontPoint Financial Services Fund
.917-934-1779
seisman@fppartners.com

2.
From: Leahy, Matthew [mleahy@fppartners.com]
Sent: Tuesday, June 01,20108:45 AM
To: Bergeron, David
Cc: Smith, Kathleen; Eisman, Steven; Susanin, Chris
SUbject: FW: For·profit education industry
Attachments: EismanSohnConference.doc; ED Presentation_SOHN.PPT; ED_GE MATRIX...;,2.xls

David and Kathleen - here is the email sent on Friday, courtesy of Steve.

Thanks,
Matt

From: Eisman, Steven

Sent: Tuesday, June 01, 2010 8:41 AM
To: Leahy, Matthew
Subject: FW: For-profit education industry

Steven Eisman
FrontPoint Financial Services Fund
917-934-1770
seisman@fppartners.com

From: Eisman, Steven

Sent: Friday, May 28,20103:14 PM
Subject: For-profit education industry

Hello,

My name is Steven Eisman and I am the Portfolio Manager at FrontPoint Partners Financial Services fund. ] wanted to
inform you that I recently spoke at the Ira Sohn conference in New York and my topic was the for-profit education
industry. My presentation was very negative and] wanted to bring to your~ttention many of the unsaid or unknown
aspects of this industry. We have been researching for-profit schools for over a year now and are very familiar with every
part of these businesses. Attached are the speech I gave and the presentation that was shared.

I have also attached a recent analysis we completed on the gainful employment proposal being reviewed currently. Our
purpose in the analysis is merely to raise awareness on the how critically important choosing the right metrics is to enact
the intended outcomes. Our analysis highlights how changing the key metrics (specifically the debt service % and the
repayment period) drastically affects the intended results. For example, while many schools will have to lower tuition
(reSUlting in lower stiJdent debt levels) under the proposed 8% debt service ratio and 10-yr repayment, under a 10% ratio
and a 15-yr repayment period, many schools will actually be able to raise tuition by 5% or more. Moving to a 20~yr
repayment with 10% ratio provides a muchlargeropportunity for nearly every school we've followed to raise tuition
substantially (in some cases by 20% or more). While I don't claim to know the Administration's ultimate objectives, I don't
believe raising student debt levels through higher tuition is the intended outcome of the proposed regulation.

Let me be clear - the debate on gainful employment has nothing to do with "student access". It has everything to do with
revenue-per-student (and thus, profit-per-student) for these schools,and that is why the for-profit industry is fighting so
hard to loosen the metrics. I just wantto ensure that the Administration is aware of how sensitive the outcomes are to
these metrics. In our opinion, if the Administration were to move. substantially away from the initial combination (8% ratio
and a 10-yr repayment period), then it would be better offtq hav~ no gainful employment rule at all, since a diluted version
will likely result in no changes atthe schools and no reduction in student's debt loads.

Should you have any questions on any of the information provided, I am available to discuss any ofour findings or
assumptions. .
1
Steven Eisman
FrontPoint Financial Services Fund
917-934-1770
seisman@fppartners.com

""
~eron, David

From: Kvaal, James

Sent: Monday, July 19, 2010 11:13 AM
To: Bergeron, David; Yuan, Georgia; McFadden, Elizabeth
SUbject: Fw: Write-up
Attachments: Down load.aspx. pdf

Sent using BlackBerry

From: Nassirian, Barmak <barmak@aacrao.org>

To: Kvaal, James
Sent: Mon Jul 19 09:47:29 2010
Subject: Write-up

1
.!!!!:Sero". David
From: Eisman, Steven [seisman@fppartners.com]
. Sent: Wednesday, May 26; 20104:30 PM
Subject: For Profit Education Industry·
Attachments: EismanSohnConference.doc; ED Presentation_SOHN.ppt

Just want to inform you that 1spoke at the Ira Sohn Investor Conference this afternoon. My topic was the For Profit
Education Industry. The presentation is very negative on the industry. Attached is the speech and the power point
presentation.

Steven Eisman
FrontPoint Financial Services Fund
seisman@fppartners.com
917-934-1770