Accreditation Concerns Move Market

A letter from the Department of Education sent out to the Office of Postsecondary Education on Thursday calls into question an accreditation body’s decision to issue American InterContinental University accreditation status. AIU is owned by Career Education CECO, and the news sent the company’s stock price down nearly 20%. Others stocks in the industry declined as well.

The letter contains many blacked-out portions but appears to relate to AIU’s program length and credit hours. The DoE’s suggestion is to look into the practices and reliability of the Higher Learning Commission of the North Central Association of Colleges and Schools as an accreditation body.

While this letter is focused on the HLC, it isn’t clear what this means for AIU, which has had accreditation issues in past. Most recently, in December 2007 it had its probationary accreditation status lifted by a different regional accreditation body and has since changed to the HLC as its accrediting agency. Given its past struggles, we consider Career Education to have a high fair value uncertainty rating, but we should point out that just because there is a concern about HLC’s accreditation standards, it doesn’t mean that AIU will lose its accreditation. If any standards were overlooked during AIU’s accreditation process, the school will probably be given time to address any shortcomings. Additionally, no other schools were mentioned as having shortcomings in the memo.

MORNINGSTAR