CHARLES TOWN – About 13,000 active duty military students enrolled at American Public University had to drop classes in October as a result of last month’s federal government shutdown.
[cleeng_content id="164135792" description="Read it now!" price="0.49" t="article"]The announcement, which came from APUS’s third quarter earnings statement, nevertheless, left stock markets unfazed since the university system also reported that it had beaten its earnings forecast for the current quarter by $1.41 million. Stock in the online university went up around 6 percent following the announcement and has remained steady since then. The stock is up around 18 percent from its low in mid-October.
Still, the shutdown had a significant impact. Failure to pass a continuing resolution caused the military’s Tuition Assistance program, which pays for up to $4,500 a year in higher education for active duty service members, to be suspended.
APUS officials believe many of those students will sign up for a subsequent course since the school starts a new round of classes each month, according to transcripts on SeekingAlpha.com.
“We believe that many military students impacted by the temporary suspension of Tuition Assistance will resume their efforts to pursue higher education,” CEO Wallace Boston told financial analysts on Nov. 5.
How many will sign back up remains uncertain.
“However, military students take three courses per year on an average, and there’s no certainty that they will modify their original plans or adjust their schedules as a result of the temporary suspension of TA in October,” Boston said. “This event may amount to a permanent deferral of registrations by certain military students.”
Harry T. Wilkins, the company’s CFO, told analysts that he projects the shutdown will have a significant impact on fourth quarter revenue.
“We believe this is largely the result of events related to the government shutdown and suspension of the TA program,” he said. “Because the services did not move quickly to reauthorize Tuition Assistance, we believe a smaller impact incurred in November 2013 due to a shorter registration window for TA students.”
Wilkins said the impact of the shutdown on fourth quarter revenue could be significant.
“As a result of these and other possible factors, American Public Education expects net course registrations by new students in the fourth quarter of 2013 to decline between 9 percent and 5 percent, year-over-year,” he said. “And net course registrations to decline between 7 percent and 3 percent year-over-year compared to the prior year period. The company anticipates fourth quarter revenue 2013 to decline between 9 percent and 5 percent compared to the prior year period.”
As a result, APUS projected that its earnings per share will be around 22 percent lower in the fourth quarter than they were in this quarter.
Vice President of Military Relations Jim Sweizer said the company is concerned about the impact of repeated federal funding crises.
“We’re concerned, because any disruption to our students’ progress disrupts us in terms of scheduling,” he said. “And they turn to other means to fund their schooling – G.I. Bill, federal student aid – so it places a burden on a lot of other governmental agencies, the schools that are serving these students and the students themselves.”
Sweizer said education has a significant impact on the lives and prospects of service members.
“The engine that runs the train is funding, and that is where Tuition Assistance comes into play,” he said. “Anyone that improves their education will do their job better, so that is the intrinsic value of it.
“Some of the services actually, at the enlisted level, award promotion points for educational attainment,” he said. “It is an unwritten rule in some of the services that you really can’t advance to the senior enlisted grades or up in the officer corps unless you have a certain level of education.”
Sweizer said he is confident that APUS will not suffer long-term harm from the one-time drop in enrollment
“They were lost for the month of October only. We suspect that most of those students re-enrolled in November,” he said. “The numbers are back to normal for this time of year.”
He added, however, that active duty students at other universities may have been harmed to a much greater degree.
“The reason it is not a calamity with our school is that we have monthly starts,” he said. “If a service member was going to a traditional school where they were on a semester system and had to wait until January to start their classes again – then their could be a problem.”
Sweizer also pointed out that the TA program is set to be cut down in 2014, partially in response to the across-the-board spending cuts known as the sequester.
“For the last few years there was speculation that something would have to be done with the Tuition Assistance program because the costs have been rising,” he said.
“All of the services have to implement unique management controls to serve as cost-saving measures,” he said, adding that the step would be “a good thing in order to maintain the program in the long run.”
“Any program that is running short of money and subject to being cut completely is not good for us – especially Tuition Assistance since a majority of our military members use that program,” he said, though he noted that the program is very small relative to the Pentagon’s overall budget. “When you look at what it actually costs – in the neighborhood of $500 million per year – to support this program, it pales in comparison to some other big-ticket items within the Department of Defense.”
Sweizer said that passage of a budget bill – rather than a series of continuing resolution – would greatly decrease uncertainty regarding the program.
“It always helps us to have a budget,” he said. “From my years in the Air Force, when I controlled the Tuition Assistance budget, [I know that] you want to have that firm commitment to fund your program throughout the year.”[/cleeng_content]