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Troubled DeVry University Gets Sold Off For A Pittance

DeVry University is losing students and burning through cash so fast that it has become a liability.

Posted on December 5, 2017, at 3:23 p.m. ET

J Pat Carter / AP

The owner of the struggling for-profit DeVry University is selling the chain to a tiny company that runs a college with fewer than 500 full-time students — part of a bizarre deal to off-load the university in which no money will immediately change hands.

DeVry's owner, the newly christened Adtalem Education, said it was handing over DeVry University and its management school, Keller, to the for-profit college company Cogswell Education. Adtalem could eventually earn up to $20 million over 10 years — a relative pittance — as part of a delayed payment based on DeVry's performance. But the publicly traded corporation won't get a penny from Cogswell right away.

DeVry has been burning through cash as its enrollments plummet; its filings show it now has roughly 25,000 students, down from over 70,000 at its peak. And it is facing a flood of more than 1,900 complaints against the school — filed with the Education Department — that ask for former students' loans to be forgiven. A provision tucked into the sale allows Cogswell to back out if the number of so-called borrower defense claims against DeVry climbs above 2,250 before the deal closes.

Adtalem is the latest company to shed a for-profit college that has been caught in a downward spiral. Earlier this year, Kaplan University was sold to Purdue, a public college, for $1. And EDMC sold off the Art Institutes to the Dream Center, a tiny nonprofit with Christian roots that had never before operated a school.

The schools are taking advantage of a political climate of lax enforcement and friendliness to for-profit college companies, said Trace Urdan, a managing director at Tyton Partners, a consulting firm.

"The Trump administration is a window that will allow all kinds of transactions to happen," Urdan said. "That window maybe closes in 2020, so this is the opportunity to get stuff done."

Under Obama, the Education Department had begun to take a hard line against for-profit colleges hoping to convert to nonprofits or sell themselves in hopes of evading regulations and repairing badly damaged reputations — though it blessed the sale of one deeply troubled college, Everest, to a student loan agency. All but a tiny number of the Everest campuses that were sold to the agency have since been shuttered.

"I don't know that the Obama administration would have approved this transfer," Urdan said.

Cogswell Education was listed as an investment on the website of Palm Ventures, a small private equity firm that owns other for-profit schools. But the investment had been removed from the company's website as of Tuesday. Neither Palm Ventures or Cogswell responded to requests for comment from BuzzFeed News.

That Adtalem gets no money at the closing of the sale is "a bit surprising," said Jeffrey Silber, an analyst at BMO Capital Markets, in a note Tuesday. But investors were thrilled with the sale. Shares in Adtalem shot up more than 8% following the news Monday, a sign of how deeply toxic DeVry — once the company's namesake asset — had become to Wall Street.

"Investors can see where DeVry is headed," said Urdan. The school's declining enrollments paired, with mounting costs, mean it's "a liability waiting to happen — it does all these things which harm the value of the stock."

Adtalem will be left with its more profitable assets, including international colleges in Brazil — where more than 100,000 of the company's students are located — and the for-profit Ross University School of Medicine, a Caribbean medical school.

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