Question-and-Answer Session
Operator
(Operator Instructions). Your first question will come from Sara Gubins – Merrill Lynch Global Securities.
Sara Gubins – Merrill Lynch Global Securities
In your guidance for the second quarter, I know this depends on the assumptions for enrollment growth, but it looks like you are expecting lower growth in revenue per student and I am wondering if that is a mix shift issue into lower-priced programs, or if it's maybe a function of the accounting for the private access loans starting to come out of revenues?
Kenneth S. Ord
Sara, it's a little bit of everything, but mostly the issue of the increased funding of our internal access loans. Again, as that moves to a discount to revenue, it does bring down slightly the growth in average rate per student.
Sara Gubins - Merrill Lynch Global Securities
As a follow-up, educational services when you take out the impact of bad debt, was up, I think a little less than 17% year-over-year in the quarter and I am wondering what – while it was better than your – or lower than your revenue growth, I am wondering what drove that up into the mid to high teens and whether you would expect that level to continue going forward?
Kenneth S. Ord
You extracted bad debt in total, or you extracted normalized bad debt?
Sara Gubins - Merrill Lynch Global Securities
I took out all bad debt just to see what educational services was excluding bad debt and it looks like it is up about 17%.
Kenneth S. Ord
As we move forward in the year, you will actually see it continue to be up slightly from the prior year until you get into the second half of the year.
Jack D. Massimino
Sara, one of the things that is driving that obviously, is population growth, student supplies, things of that sort are moving along. Our population growth is up substantially year-over-year. The other thing that is in there is an increase in compensation, because of reviews that we have done. There is an impact of that running through there, so those are probably the two fundamental things rolling through.
Peter C. Waller
Sara, you were focusing on the absolute. I talked in my words to the margin leverage that we are getting and the revenue up north of 18%. We are getting the margin leverage and particularly when we take out bad debt and we peel it back into the different verticals that we have. So we are actually encouraged by progress that we are making in educational services.
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