In the six weeks since the Obama administration issued weaker-than-expected rules governing student debt at for-profit colleges, the University of Phoenix's founder and executive board chairman has cashed out more than $59 million of the school's parent company's stock, according to filings with the Securities and Exchange Commission. The company's share prices on Wall Street have climbed to the highest levels in more than six months.
John G. Sperling's sale of 1.8 million shares comes as the stocks at many for-profit college companies have surged in the wake of the Department of Education's issuance of "gainful employment" rules, which the for-profit college industry had been aggressively fighting for more than a year.
As enrollments at for-profit colleges have swelled over the past decade, along with the federal financial aid dollars that deliver as much as 90 percent of their revenues, scrutiny has intensified on students' outcomes. Hundreds of thousands of students at for-profit colleges have emerged with enormous debts and meager job prospects, resulting in a disproportionate share of student loan defaults at for-profit colleges.
The Obama administration's new rules were expected to rein in schools that aggressively recruited students but did little for their academic and employment outcomes once they were in the door. Many industry executives and Wall Street investors anticipated stricter rules that could have barred certain underperforming programs from accessing lucrative federal student aid dollars.
Beginning last summer, when the Department of Education released a draft version of the regulations, stocks at the Apollo Group, the University of Phoenix's parent company, and many other higher education corporations began to tumble. But the resulting rules essentially gave the industry carte blanche to continue as usual, taking a more lenient approach that gives schools an additional three years to come into federal student aid compliance. One former Department of Education official said the administration "caved in" to the industry's pressure.
The market certainly signaled that the rules changed little, as stocks at many of those schools' parent companies soared and have remained strong ever since.
The weakening of the rules came after an extensive yearlong battle in Washington waged by the for-profit college industry that included substantial lobbying and campaign finance money from the Apollo Group and Sperling himself.
Since the regulations were released, executives at several for-profit college corporations have cashed out, including Donald Graham, the chairman and chief executive of the Washington Post Co., which owns the sprawling Kaplan University system. Graham has sold more than $12.5 million in stock, on behalf of trusts for his siblings since early June, SEC records show.
The chief executive of Bridgepoint Education Inc. of San Diego, Andrew S. Clark, purchased more than 110,000 shares of stock and then sold them for more than $2.5 million, according to SEC filings -- after the company's stock price saw steady gains.
But University of Phoenix's Sperling, a titan in the field of for-profit higher education, has had the biggest windfall of any executive at publicly traded education companies.
Sperling hasn't been shy about selling his Apollo Group stock in recent years. In April of this year, he sold $57 million in stocks, though share prices were lower at that time. The sales in April combined with those in the past month -- after the Department of Education rules were released -- marked the highest volume of transactions for Sperling in two years, according to SEC filings.
Despite the recent jump, two years earlier, in July 2009, before the government scrutiny began, shares were trading 30 percent higher than they are now.
The bulk of Sperling's stock transactions were for a trust set up under his name. He is the beneficiary and trustee of the account, according to the SEC. Since January, Sperling has sold nearly a quarter of all shares from the trust. He still has a significant amount of stock in the Apollo Group -- including 51 percent of the stock that carries voting power for the company, giving him virtually unchecked control over the membership of the board of directors.
Sperling's son, Peter Sperling, controls the remainder of the voting stock. Peter Sperling also has sold more than $11.9 million in stock since the beginning of June, according to SEC filings.
A University of Phoenix spokesman declined to answer questions about the stock sales, saying the company does not comment on personal transactions.
John Sperling founded the University of Phoenix in 1976, after teaching as a professor for more than a decade at San Jose State University, where he supported a practical teaching style that focused on preparing adults to be marketable in the workplace. Considered an eccentric billionaire, Sperling has used his fortune over the years to fund projects ranging from pet cloning to the decriminalization of marijuana.
Expanding its ground campuses and online offerings, the University of Phoenix enrolled more than 476,000 students last year, making it the largest college in the nation -- bigger than the combined student population of the State University of New York. The school has a professional football stadium in Phoenix named after it.
In light of increased scrutiny from the federal government, enrollments have dropped this year to about 400,000 students.