Good day ladies and gentlemen and welcome to the Career Education Third Quarter 2008 Earnings Conference Call. My name is [Onicka] and I will be the coordinator for today. (Operator Instructions). At this time I would now like to turn the presentation over to your host for today's call, Mr. John Springer, Vice President of Investor Relations. Please proceed, sir. Mr. Springer, you may proceed.

Thank you, [Onicka]. Good morning everyone and thank you for joining us on Third Quarter 2008 Earnings Call. With me on the call this morning are Gary McCullough, our President and Chief Executive Officer, and Mike Graham, our Chief Financial Officer. Following a brief presentation by management the call will be open for analysts and investor questions. This conference call is being Web cast live on the Investor Relations section of our Web site at careered.com. The replay will also be available on our site. If we are unable to answer your question during the call, please call our Investor Relations Department at (847) 585-3899. Now before I turn the call over to Gary, let me remind you that yesterday's press release and the presentations made this morning by our executives may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on information currently available to us, and involve risks and uncertainties that could cause our actual results, performance, and business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. These risks and uncertainties include, but are not limited to, those factors identified in our quarterly earnings release, our annual report on Form 10-K for the year ended December 31, 2007, and our quarterly and other filings with the Securities and Exchange Commission. Except as expressly required by these Security laws, we undertake no obligation to update these risk factors or to publically announce the results of any of these forward-looking statements to reflect future events, developments, or changed circumstances, or for any other reason. Now let me turn the call over to Gary McCullough.

Thank you, John. And once again, thank you for joining us today on our Third Quarter 2008 Earnings Call. Before we go into specifics on our quarterly results, I want to provide a perspective on where we stand at this point in our corporate turnaround, a process we began just over a year ago. We came into 2008 with a good plan and a solid understanding of the internal operational and cultural challenges facing us at the beginning of the year. Of course shortly after the year began, we were confronted with the headwind of a significant contraction in the student-lending environment. So in 2008 we have worked to manage through substantial challenges, and I'm proud of what our team has done through the first nine months of the year. Our focus in 2008 has been on building a foundation for sustainable growth through improved organization effectiveness and efficiency. In doing this, we have been addressed to structural issues in our company that impacted our short-term financial performance. For example, we were teaching-out 14 unprofitable schools. The teach-outs are progressing well and we are ahead of our original plan. So we have continued to take aggressive actions to rationalize the company's real estate footprint. We have disposed of just over 0.5 million square feet of excess real estate capacity since 2007. We've also worked to create a more unified culture performance to drive consistency in how we operate, and to allow us to create and leverage scale. This work is challenging, and I'd be less than honest if I didn't say that at times it seems we take two steps forward and one step back. However, these efforts have enabled us to keep accreditation and regulatory issues in check. I give you this perspective because in March of this year…

Thanks, Gary. I'd like to start by providing some more information regarding the non-comparable items during the third quarter. Following that I'll discuss our quarterly results, including financial highlights. As you review our third quarter results, please note there are a number of items impacting year-over-year comparability, which are highlighted in last night's press release. We have indicated a key initiative as part of the renewal of the company as a reduction of our real estate footprint. This quarter we were able to close on several opportunities with favorable economic outcomes to the company. We incurred $10.9 million in lease exit expenses, and a $4.8 million charge non-cash asset impairment related to rationalization of our real estate, primarily related to a CCA San Francisco campus, within Culinary, and vacating a full floor in a Gibbs, New York facility. These moves reduced the overall square feet of our CCA, California Culinary Academy campus, from 245,000-square feet to 104,000-square feet. While this campus is still larger than needed to serve the student population, we have reduced our annual culinary occupancy expense beginning in 2009 by approximately $3 million. Another non-comparable item was a $2 million non-cash impairment charge related to the write-off of trade names in the Health SVU, related to removing any of Western Schools of Health and Business careers and moving those to Stanford Brown. And finally, a $3.2 million one-time income tax benefit related to the sale of the IADT Toronto School. Now let me give you some more details around the third quarter results. Overall revenue was $405.6 million in the third quarter, down 5% from the quarter last year. Excluding our schools within the transitional schools segment, which are currently being taught out, total revenue decreased 1%, primarily related to schools most heavily related impact by student…

(Operator Instructions) Your first question comes from Robert Craig – Stifel Nicolaus.: Robert Craig – Stifel Nicolaus: Couple of questions for you. First off, regarding the peer issues, this first one where are you versus where you would like to be in terms of rep efficiency, and maybe if you could give us a sort of before and after photo of that kind of productivity since the implementation of the peer process?

Sure, Bob, this is Gary. I would tell you that we worked diligently through the peer issues. We believe those issues are behind us now and we’re very pleased with what we’re doing with the head count we’ve got. If you recall there was a question last quarter about because we had reduced head count, we thought that might be the leading cause of the diminishment in our starts, and the fact of the matter is, from last year we’re down about 19% in terms of admission representatives, yet you see the growth that we delivered in the university business on our starts. And so we believe peer is behind us. We think we’re getting good efficiency out of the reps that we have, which is again what we had modeled in the program. Robert Craig – Stifel Nicolaus: The University segment obviously helped in the quarter by the calendar shift, but I take it, and you mentioned this in the last call that there was some lingering negative impact from peer, and I know you won’t provide specific guidance, but could you give some indication directionally of what you’d expect in the fourth quarter from that division in terms of starts?

Sure I guess from a macro point of view, as we look forward, we think we’ll see continued very healthy starts at CTU. We believe that while we’ve got the issues behind us, we’ll see more variability at AIU. Robert Craig – Stifel Nicolaus: Okay, but no percentage I take it?

No, Bob. Robert Craig – Stifel Nicolaus: And the timing of the remaining teach-outs in 2009, some of those have happened a little sooner than we expected, would you anticipate those would be front-loaded or fairly even throughout the year?

I would expect they would be more back-loaded than front-loaded. We’re doing a very good job of teaching out the classes and reducing the population, and to the extent that we have a small amount of population left in the school, we’re looking for other arrangements with other schools to accelerate the teach-out. But again, for the most part, because the announcement of the teach-out was at the beginning of this year, and given the curriculum length, and traditionally two years in curriculum, most of the teach-outs will be towards the end of the year. We did talk at one time that for the AIU, L.A. campus, we thought that teach-out may go through 2010 and we’re working hard to see if we can have that teach-out complete by the end of 2009. Robert Craig – Stifel Nicolaus: Last question, then I’ll turn it over. Could you tell us where you stand, or the Board stands, in terms of share repo, and if that’s not going to be re-fired up, how would you return cash to your owners? How do you think about that?

We continue to have the share repurchase authorization in place. We’ve at least initially took a conservative view of conserving cash as we've come through some of the student loan financing issues. I expect that we will have continued conversation with the Board around how to deal with the 20% trigger issue, but at this point we don’t have a resolution to that.

Your next question comes from Trace Urdan – Signal Hill Corp. Trace Urdan – Signal Hill Corp.: I’m struck really by the different approach that you all seem to be taking with respect to student lending at the margin than some of the peer companies, and I’m wondering if you talk about it, maybe even specifically with respect to the Art and Design students? What is the process of identifying a student that you think is not going to be successful in the program, because the prepared remarks kind of implied that you were looking at the likelihood of their being able to prove academic success and employment success? And I’m wondering if that’s the case, or if it really is about credit scores. Can you speak to that point a little bit?

Sure I think it’s’ consistent with the messaging we’ve given in the last three quarters. As we looked at the lending environment, and remember the Culinary and Art and Design have some very large gaps and very large loan balances on a relative basis for the students, and based on knowing that Sallie Mae was anticipating a 44% discount rate, so we'll anticipate that the defaults are going to be at 44%. And knowing that underneath Sallie Mae’s level that we as a company had historically provided financing to, that those students defaulting at some place 50% or more from an educational standpoint; although, they were graduating and getting placed they weren’t living up to their commitments of the loan. We felt it was prudent and we thought it was in the best interest of the company and the students that we would take a more stringent approach to some lending. That said, what we have lent to is not students below the previous recourse level of Sallie Mae. We have lent to students in the highest part of the recourse level, and we’ve lent to every student available that Sallie Mae has left above the recourse level. So I think what you’re seeing is we were probably, call it over indexed, to some sub-prime students coming into this year. We made the decisions to move away from those students that would have a high likelihood of default. And the students now that we have much better FICO scores than ever before. We hope will graduate and place even better, and we hope that their success will be very high in paying back their loans. That said we had a huge improvement in our culinary default rates in the last year, down to 8.5%, so we’re seeing improvement in our portfolio.

Trace, this is Gary. I’d say one additional thing. What we also did, particularly beginning in our culinary business, was put those resources in place that were necessary to ensure students that we might have expected to default, or might have expected to not complete the program, to ensure we gave them the support that they've needed. They have continued to improve. We’re building a database of what that looks like, and as we continue to get comfortable with that student who might not have given us much support in the past, will move through the program and are making their in-school payments, we will open up to more students, but we needed the assurance that was going to be the case. We look at that, and the track record we’ve got right now going in our culinary business, we think we can reapply that model in our art and design business. Trace Urdan – Signal Hill Corp.: I mean the Culinary intuitively makes a lot of sense, because we’ve all known for quite some time that the starting salary levels of students that graduate in that segment are very low, and that the cost equation doesn’t work out on paper the way it does in some of the other segments. I’m more struck by what seems to be the pull back in the Art and design segment. And I guess I’m wondering if it doesn’t beg the question about pricing in those program areas, and whether there’s not something else that needs to be examined in those program offerings, given that you guys are retreating so significantly from what had been the enrolment base before.

I think if you look at what we did going into the year, we had a lot of momentum on culinary that we had in place moving from a 15-month program to a 21-month program. For Art and Design, remember the complexity of the business. It is a series of International Academy of Design Technology schools. It is also schools from our previous college division and it’s an online component. So within those three different business units combined in one SVU, we have not got as much traction as we did with our culinary business. I think we’re hoping that we’ll see the same type of attraction now as we continue to work the programs there. From a pricing standpoint, we’ve looked at grants, we’ve looked at scholarships, we’ve looked at our own scholarship money from our alumni. We’ve looked at different ways, and we’ve looked at the program in terms of how it maximizes title for our funding. I think again, as you look at the three different businesses if you want to call it that across the SVU, more work to do to get a consistency. We have taken cost out of the business, which is good. Probably not as quickly as we need to, we’re still working on that, and especially in the lending environment, both Culinary and Art and Design as Gary said, when we see that we have a chance to retain students better and increase success, we lower our FICO scores, we will allow more less in-school payment, and more loan deferral. We’ll allow bigger loan balances as long as it’s paired up with a great formula to help student success. Culinary has delivered on that, Art and Design are working their plans, and we’re looking forward to them as a company here linking that up and helping the funding issue more with programs that combine FICO scores with student success. Trace Urdan – Signal Hill Group: Just one more follow up and then I’ll let you move on. So you think the comment about making that change when you see that potential for success, are you talking institutionally there, or is there some measure that you can see student-by-student as you’re talking to those prospects in extending credit to them?

I think the answer is both. One of the things we want to see is our ability to retain students, our ability to make sure we move them through the programs, and then should their outcomes at the other end where we can assist them to get jobs and continue to pay. And frankly we haven’t always been that diligent across the company, so we will do that. We also look at each student on a case-by-case basis and where we think there’s merit we’ll fund the student.

I think on the enrolment process, I think a lot more people in the industry and the private loan industry have asked for co-borrowers, and we’re requiring co-borrowers in certain situations, it’s a different conversation with the student. And the student that is willing to ask the spouse, the parent, someone else, to be a co-borrower on a loan, they’re obviously very serious about their education. And our program does require co-borrower denials, and we do have a dealing for co-borrowers. I think if that process brings in higher quality students with better success possibilities.

Your next question comes from Brandon Dobell – William Blair Brandon Dobell – William Blair: Question first for Gary. As you look back, let’s call it the last two or three quarters, how satisfied or dissatisfied are you with key employee retention? I know that the headquarters management team has changed a lot, but as you look out across the different geographic locations and schools, are you satisfied with how the retention has been? Are you satisfied how with the compensation scheme, so you think those have aligned people correctly? Just more of an HR perspective on some of those key operations would be helpful.

Frankly I’m pleased with the results that we’ve had year-to-date. We’re down 17% in voluntary turnover in the company, that’s across the board. I feel terrific about that. That said, I still think our turnover rates are too high. As I told you and folks more than a year ago, when I came in I was alarmed by what I saw across each of the functions and each of the businesses, and so we’ve worked very hard and built into the compensation programs at the school level and all the way up to my level. We’ve tied compensation to our ability to retain our employees. So we’re down 17% through the first nine months of the quarter. That’s good, but I still think we’re too high if from a macro point of view. Brandon Dobell – William Blair: And then switching gears over to the enrolment advisor, kind of head count perspective, Nice to come on to year-on-year and it sounds like good leverage on those people from a productivity perspective. How do you guys think about starting to grow that head count number? At what level of starts or starts plus persistence do you think we should expect the head count between enrolment counselors and peer qualifiers to either stabilize or to start to turn upward? You guys get a lot more productivity out of people there right now, or do you think that you’re confident enough in this stark trajectory that you need to start bolstering that workforce a little bit?

I think from a headcount reduction standpoint, we’re just about done from the large head count reductions that you’ve seen, because that was all driven by the peer qualifier method, the two-step method, and by technology. So that’s in place across the online businesses. We probably have some more work to do on the on-ground businesses, and we can find some productivity, additionally with the part time workforce that we have in the peer model. We will continue as they get more experienced in the model, because remember the model has just been rolled out in the last year and our turnover is down dramatically. We got more and more seasoned representatives on hand. So I think the productivity now comes less from head count reduction than it does from conversion rate, it does from show rate, and from stitch-ins, because we have more experienced people, more dedicated people, and strong people on the second half of the peer model. So I don’t think we’ll see dramatic savings going forward through next year as we’ve seen this year. And I think from a variable standpoint, it would be our goal to gain operating leverage that as starts increase we would not increase the same rep level at the same rate, but the rep count level would grow slower than the overall start level, and we continue to get some efficiencies. Brandon Dobell – William Blair: Okay and then final question. As you think about the process of matriculating students from associate's into bachelor's, kind of a crossover organization within the university in particular, any updated stats or commentary you can give us in terms of how those matriculation percentages are trending? Are you giving more discounts to students who make that transition from associate's to a bachelor's to keep them going? Just give more of your strategic positioning around that opportunity, Greg.

Sure, Brandon, if you recall, I think we’ve mentioned previously that in AIU, which has more experience in this two plus two program, their historic experience was about 50% matriculation from the associate degree into the bachelor's degree program. And that remains about consistent at this point in time as we don’t do anything significant from a pricing point of view to encourage that. We think that the data because suggest that believe our program is strong and that the online experience in particular is a strong one, and they move through to the bachelors degree program. At CTU we’re seeing a matriculation rate about 10 points higher than that, so approaching 60%. Again, we don’t do anything significant to move them through, but that’s our experience today. So we feel good about where we are. One of the things we do make sure that we do is in both cases, as students are moving through and finishing up their associate degree program, we certainly increase the volume to them to make sure they understand that a bachelor's degree is available to them at both institutions, and that’s all we’ve done at this point in time.

Your next question comes from Cory Greendale – First Analysis Securities Cory Greendale – First Analysis Securities: I have a couple of questions about the culinary segment. First of all, how confident are you, or to what degree do you think the decrease in starts is entirely due to the funding issues versus students becoming more sensitive to the value proposition in this kind of environment?

I would say we would attribute almost all of it to the lending environment and the tightening that we’ve had to do from the program. Interest in the program remains strong. Lead volume is much lower than the decline in starts, so we have seen a decrease in lead volume related to primarily the funding level, but the starts are different. So, that would indicate that the interest is there but it’s tougher for gating for the student to get through student financing issues. So I think the culinary program continues to be of interest. We have the highest placement rates in the company, in the culinary business, and so we know the students are doing well. We had the lowest cohort default rate in the company in the culinary segment, so students that graduate and are placed do a very good job of living up to their obligations, so the outcomes are very strong in culinary. So I think it’s driven more along the student financing that on the upfront gating. Cory Greendale – First Analysis Securities: And when you roll out the 21-month programs, is the expectation that basically all the students are going to go into those longer programs, or some smaller percentage, or do you have a guess at this point?

Yes, we’ll continue to keep the current program in place, the 15-month program versus the 21-month program. And we’re doing that because there are some students who do have a desire to get in and have the ability to get in and move through more quickly. But again, the majority of the students that we’ve seen at least at this point do tend to take longer and so we’ll be encouraging them to move to 21-month program, but we’ll continue to offer both. Cory Greendale – First Analysis Securities: If I could ask Mike one question about the profitability in culinary. As the 21-month program is rolled out, presumably that affects the revenue per student in any given quarter, and it’s not transparently obvious. I know you’re making some efforts to cut costs there, but how profitable that business can be as that revenue per student in any given quarter comes down? Can you just speak to the targets that you mentioned at the Investor Day for that segment, whether you’re still confident in that and whether that business will still be profitable in ’09 or if it’s going to take more to 2010 to get that culinary segment profitable?

Sure, and we’ve given the guidelines for 2010. I think we’re still confident in the culinary guidelines we gave. Probably the lower end of that range based on the student loan contraction that we’ve experienced. Through 2009 you will have call it the teach-out of the 15-month program and the rolling in of the 21-month program, which will drop the RPS. That will continue to put pressure on culinary through next year. Remember that we anniversary out on April 1st the Sallie Mae recourse program, and so once we get behind that from a start standpoint, we would hope in the second half of the year that you’d see better trend versus the previous because you’ll get rid of the previous history. So, we don’t give specific guidance for ’09. I can’t do that. I think 2009 will be a challenging year for culinary margin-wise, and we’ll continue to take costs out. We’ve taken a lot of costs out of the business. We’ve taken a lot of head count out of the business on a variable basis. Structurally, we’re starting to take the real estate out of the business, including CCI. We’ve got start-ups in place from Dallas, from Boston that are doing well in kitchen academies. So we’re still confident in the business, and we also from a comparability standpoint will have those start-ups that will go through that ramp-up period and they typically will break even within 15 months. So that should also help boost us as we go forward ’09 to ’10. Cory Greendale – First Analysis Securities: And just one last quick one, were there any unusual charges that ran through the corporate cost segment, and is that $16.9 million a good run rate to use?

There is nothing unusual that will answer it. The two influences are the previous year at this point in time the company was over 40% off of its bonus target. And this year, as we’ve talked about, we are on our plan. And so, we have from a company standpoint a higher bonus level. Second is we do charge out from the corporate level to the businesses within the segment allocation part of the corporate allocation, as revenues have fallen in some of those business units, corporate has more costs. So it’s an absorption issue and a bonus draw-up issue, versus last year. Last year’s third quarter we did shore up our bonus, and as we discussed about a year ago, we did reverse accruals at this time for the bonus plan in ’07.

Your next question comes from the line of Jeff Silber – BMO Capital Markets. Jeff Silber – BMO Capital Markets : Just wanted to go back to your internal lending program. And I know you’re not giving ’09 guidance, but given everything that you know now, do you expect that program to increase next year, stay the same, decrease? I’m just wondering what your current thoughts are.

Current thoughts are it’s going to increase. The private lending market has tightened up as everyone knows, the tightening up with students with very high FICO scores, good parent co-borrowers. It’s our intention to lend to those students off our balance sheet. So we would anticipate to use our balance sheet for those. Additionally, these balances will grow. We only had nine months in the program this year and remember that we did package up as many students as possible by April 1 under the former programs, so even your second quarter was dampened in terms of the volume. Currently, we have about $16 million. We’ll have $25 million to $30 million at the end of the year, and I would think the pace will increase as the students continue to come on the program. And we’re also loosening up criteria, as we’ve done in culinary, and we’re paired up with another program, such as the Student Success Manager, so I think going into next year we will continue to loosen up as we get more visibility on the success profile, continue to loosen up our FICO scores and our underwriting to help students out. Jeff Silber – BMO Capital Markets : And in terms of the 44% discount rate, is that something that we should be using going forward as well?

Until further notice, the 44%, bad debt rate is the former discount rate used for Sallie Mae. Again, we don’t have underwriting data of how the Sallie Mae loans did perform in the past. Until we can get good solid verifiable data that we’re confident in and our auditors are confident in, we’re going to stick with the 44%. I don’t think we’ll have more visibility until at least a year into the program, so I would anticipate that rate would continue through next year, and as soon as we get better verifiable data on the patterns of payment we’ll be able to update that. We hope its conservative, because of the success factors and the higher FICO scores and the better student we’re using, but we’ll stay with 44% through next year. Jeff Silber – BMO Capital Markets: Just in terms of the current environment, I know the start date you gave us was through the end of September and I know the enrollment data was from the end of October. But a lot has changed over the past month or so. Are you seeing any change in terms of the mentality of your students based on what’s been happening over the past few weeks in terms of either their applying, enrolling, showing up, etc.?

There’s nothing concrete I could point to at this point, Jeff. I would tell you that we continue to see demand for our programs. Without sharing numbers, as I said in my prepared remarks, we moved through our own internal issues and we’ve seen consecutively the strongest starts in CTU’s history, so I think we’re seeing the demand. We’re seeing the execution on our part. There’s variability across the business as well. I use that as an example. I’m seeing continued demand and our job is to execute against that demand.

And I think also, as we looked across our third quarter, our business’s show rate was up, and attrition was down. So I think the value of the education, the softness of the economy, the show rate is higher after students are being packaged. Attrition is down. They want their education. Our October starts were not inconsistent with our expectations, so we did not see in October anything that would suggest concern to us just based on one month.

The next question is from Amy Junker – Robert W. Baird. Amy Junker – Robert W. Baird : I just have a couple of quick ones. First, Mike, can you just talk a little bit about the operating margins within an AIU on the campuses? I’m wondering if it’s possible to see that eventually turn positive at some point, or if there’s something structural that would prevent that from happening?

I think you have to look at it campus-by-campus. I think we had some conversation around this last quarter. From an AIU standpoint – we do have a London campus important to the business, but given where the pound is and the affordability for the student against the U.S. dollar and real estate issues in London that are historical for us, difficult to see us making significant progress against the operating losses we’ve been experiencing. From our other campuses, we did look at L.A., and we’re teaching that one out. The remaining campuses – we’re pleased with their performance. We do have some capacity issues in a certain number of our campuses from a real estate standpoint that we’re dealing with. In the quarter, we had a little bit of margin compression on the ground businesses, because our Houston campus was obviously affected by Hurricane Ike, and so we probably had somewhere between a quarter and a half million dollar profitability compression there on that business. Our plans for ’09 are currently being developed. I think as we outline the calendars, we have a better chance of success for those on-ground campuses. We’re confident the management team is taking cost out in line with the population. And I think the re-branding effort and the higher awareness effort gives us some confidence going into ’09 that those business will do better. I think it’s a matter of operating leverage in those campuses, so we need to get the population back, versus any more cost efforts. Amy Junker – Robert W. Baird : And just a clarification on the L.A. campus. That’s not in the transition segment, that’s actually still in AIU or in the university segment?

No, that is in transitional. But at the beginning of the year we made the decision to teach-out. It would be the highest under-performing campus and the largest loss that we had. I think L.A was accounted for about 50% of the ground loss in 2007 of our AU campuses. Amy Junker – Robert W. Baird : And then just one other – the $90 million to $100 million charges you expect in '09 – can you give us kind of a rough thought on how that will break down between quarters? Is it going to near kind of when the T tax actually happens so it should be more back-end loaded?

Yes. It's 100% with the teach-out. On the day of closure you take the charge, and so I believe that from where we're looking towards, like Gibbs, Piscataway, we are able to accelerate that and we took that into '08. I think that from a calendar standpoint, the majority of those closures, the majority of that charge will be back half loaded. Hard to say right now because we're year-out whether the student population drops enough between third quarter and fourth quarter, but most of those based on the carry-in population we have would be back-half loaded.

Your next question comes from Gary Bisbee – Barclays Capital. Gary Bisbee – Barclays Capital: Sorry to pound on the culinary, but had a question there. I guess I'm wondering would your willingness to lend to some of these students potentially increase as the gap is much smaller under both with the enrolment increase and the new 21-month program? Is part of the issue just that the gap is so large and is relative to the total tuition cost that you're taking a lot more risk, and if it were much smaller you might be willing to take that risk, or is that not really a consideration right now?

That is a consideration, and as the funding limits have increased it's dropped the amount of lending that the student needs from us. And we've got a cap, and we've said this before, that we've capped off our loan balances at about $9,000 per year for the student, and we made sure they had a four-blot of school payments, so to the extent that they're getting more Stamford loans or the additional Pell Grant that cuts their gap, and it gives us a better economic model to lend to them. From a price standpoint again, we look at to the students who look at scholarships and we look at grant programs for them, and to the extent that we can use them more to help certain students within FICO scores that are more challenged. We do that right now and we'll continue to expand that as we align the student for graduation and placement.

Gary. One additional thought is if you recall, we began the discussion of the move to a 21-month program before we realized that even the full potential of the full amount of the issue we have with regard to student lending, is we have looked at where we were from a competitive point of view, we weren't satisfied that we had done our best with our more concentrated program by the student in terms of we are allowing them to access more funding, and therefore reducing the our-of-school payments because of the large gap. And so we began that move, and certainly the changes we've seen in student lending have had us accelerate what we were doing to make sure that we were right by them. And you're correct, with some of the changes we've seen, with some of the increased loan limits and with the reduction in gap, we would feel more comfortable. Gary Bisbee – Barclays Capital: Given the lead for what you're seeing, and obviously you've got a sense as to what the gap will drop to when you go to the 21-month program, what's your confidence level that – and you're going to have to work off the majority of the 15-month students, but you can have a reasonably positive ramp in enrolment in the 21-month program, or is it early enough that it's just way too hard to tell at this point?

It's pretty early at this point in time. We'll probably have more that we can talk about some time into the second quarter of next year. The 21-month program goes live in the first quarter, so we just don't have a date at this point. Gary Bisbee – Barclays Capital: Switching gears, you mentioned, I think, up to a 10% price increase somewhere at University, did you say that was at CTU, or can you clarify what that was and when that goes into affect?

Sure. This is Gary again. It's at both universities, AIU and CTU, and it varies, the range varies whether it's in an associate's degree and a bachelor degree programs, but again, what we've said is we don't take a one-size-fits-all approach to pricing, and so we've looked at where we think there's the opportunity to do that, both on a local level and by programatically. And so I said ranging up to 10%, because that's the top end of where we'll be.

And the price increases are both affected the fact that it's across two institutions on the 1st of January. Gary Bisbee – Barclays Capital: And so is that likely to actually turn the revue per student declines there, which actually moderate quite a bit this quarter, is that likely to turn positive next year, or do you still think the mix shift is going to keep that form really growing?

I think the mix shift is somewhat stabilized as you look at the quarterly comparisons year-over-year. We're seeing now quarter-to-quarter, sequentially first, second, third quarter, we're seeing a stabilization of population, so I think we're expecting the population associate versus bachelor to stabilize going into next year. I think we'll get some benefit from CTU as the two plus two students move up to bachelor degree helping the RPS next year, and we'll have the price increases that should help the RPS going into next year. Gary Bisbee – Barclays Capital: Is there any way to give us a sense of what the blended price increase could look like?

Not at this point.

We didn't want to share that detail right now. Gary Bisbee – Barclays Capital: And just one last one. I recently saw a couple of e-mail as part of the marketing campaign for AIU that was talking about a slowing paced program. Over the last few months I've seen this a couple times. Can you give us a sense if that has had any real success relative to the more accelerated higher cost program, or is that still right now in its infancy?

It's still in its infancy. Again, stepping back one of the things that we noted in our portfolio is that all of our programs were accelerated, and that frankly doesn't work for quite a number of our students. And so we've looked at what we can do to better appeal people who have interest in the programs, and when they find out that the demand and the speed of our program is significantly faster and higher than that of other programs, opt out and may choose to go someplace else. So we're looking at how we mitigate that in our programs. It's not right for everybody.

No data at this point in time.

Your next question comes from Sara Gubins – Merrill Lynch. Sara Gubins – Merrill Lynch: Just following up on the price increases. Are you planning on any other price increases in the other divisions?

I think as we have spoke about it in the past calls, pricing is a institution-by-institution decision. From a university standpoint, we've talked about what we've done there. Our Health business continues to be in a high demand, outcomes are very good, the starts are very strong, the 90/10 issues are limited versus some of the other health institutions out there. So Health has the opportunity, obviously, to make sure that it has appropriate pricing. From a Culinary and our Art and Design standpoint, with the gaps we're experiencing as the declining starts, we'd be very cautious about pricing right now in this environment. And in our international businesses, take annual price increases again, traditional calendar, so as the new students arrive in this September's term that we have traditional pricing within the international business. Sara Gubins – Merrill Lynch: And about how much is it in international typically?

We haven't disclosed that. Sara Gubins – Merrill Lynch: In terms of the availability of third-party private loans, can you give any update on that, and whether or not you've seen any changes out of the last couple of months or the last few weeks?

We have seen no changes to the third quarter from availability. The lender list we had remained consistent. We've seen no material changes in underwriting standards that we can discern, and no announcements from the lenders, including the last several weeks. I think, as every other institution around the country got – there was note from Sallie Mae to institutions to its students just indicating that they were reviewing their criteria – we got that note like everyone else did. And again, to the extent that Sallie Mae, within the strong FICO bands that they are tightening up we stand by with our balance sheet and our programs to lend those students, because their very strong FICO score students. Sara Gubins – Merrill Lynch: And then just a last question. In terms of advertising costs, do you expect that you'll continue to be able to get some declines in those on a year-over-year basis going forward?

Yes. We've just begun to see some moderation in advertising across – remember that the vast majority of our marketing effort is online, so we differ to some degree from folks who are out there who are benefiting from softness in the television media space, but we are seeing moderation both in the online tease and in our TV advertising space, particularly since the election is over and hopefully we'll see that continue going forward.

Your next question comes from Kevin Doherty – Banc of America Securities. Kevin Doherty – Banc of America Securities: Just a followup on that last question. Just given the pricing, would the economics look more favorable that you'd actually shift some dollars back to the TV market, or is your strategy just completely from the mix you used to have in the past?

We've always had a balance of online and television media. We disproportionately had been developed or overdeveloped in the online space, that's just been a function of where the company has done things historically. We think there are opportunities to begin to shift that mix, but there's work to be done to make that mix-shift happen. We are engaged in that work at this point in time, but we don't see a significant shift away from the online media at this point in time or in the near term, but we're continuing to look at what the best way to support our businesses going forward. Kevin Doherty – Banc of America Securities: And just kind of a bright spot of your core operations, could you talk about the potential in the health education segment in this environment, and is this really an area where start growth can accelerate much further, is there really anything keeping a lid on that growth rate? Then maybe if you could just talk about how much capacity you picked up when you did convert some of those schools over.

Sure. From a macro point of view I would tell you that we're obviously very pleased with what we see going on in health. We believe there's continued, or will be more upside in health. Our issue right now going forward, we're not at capacity, but in certain of our campuses we are approaching capacity, and so we do have in some places waiting lists, and that speaks to what Mike said earlier. We do have the capacity to price to moderate that, but we do have waiting lists income places, and so our challenge right now is to continue to invest in the business to expand geographic expansion, or to put more capacity in play, so when we're looking at both those opportunities as we go forward.

To your question about the additional capacity, 2 schools, put that on a base of just over 20 schools in the health business, so that will give you an idea of the capacity that's been added by Melville and Vienna. And obviously, our startup plans continue. We do have startups in place right now for health that will help add capacity next year.

Your next question comes from Mark Marostica – Piper Jaffray. Mark Marostica – Piper Jaffray: Question for you on AIU. You mentioned, Gary, the future variability in AIU, and I think you're speaking of online and fourth quarter. Can you give us a sense what that may be attributed to? Is it media issues and reputation, or is there something else we should be noting there?

I'm glad to clarify that, Mark. I was about to welcome you to the company, but we have just a number of things moving around. We've talked about [inaudible] the days going from one to the other, we are still working through locally what had been reputation issues, and so I'm just not as confident in the AIU starts going forward as I am at this point from a consistency point of view as I am in CTU. So again, we're seeing variability in demand and issues we have to overcome on a case-by-case basis. So that's why I say that. I just want to make sure that we don't build expectations that we can't live up to as we go forward. Mark Marostica – Piper Jaffray: And then related to the Art and Design and Culinary segments, you mentioned – obviously you're more stringent with regards to your FICO acceptance standards – when do you anniversary those more stringent standards?

The recourse program from Sallie Mae ended April 1st of this year, so next year we anniversary off losing Sallie Mae and replacing with our own balance sheet program. Mark Marostica – Piper Jaffray: And then relative to a previous question there concerning private loans. Where do you sit right now in terms of percentage of tuition revenue from private loans in addition to the $25 million to $35 million you contemplate having on the balance sheet by the end of the year?

Sure. Through the nine months our total domestic revenue in a cash basis from private loans is approximately 12%, down from 18% from this time last year through nine months. Mark Marostica – Piper Jaffray: Do you expect that next year to be about the same?

I would expect that to decline, because more of our balance sheet will be used for the private loans, plus in the nine months you did have the one quarter of Sallie Mae and the first quarter of this year which contributes to that 12% year-to-date. I think that number will track down to between 10% and 11% over time. Mark Marostica – Piper Jaffray: And then two last questions here. One, you may have mentioned it, Mike, but I didn't catch it. That data is a percentage of revenue in the quarter?

Just over 3% I think. I don't have it. Yes. It's 2.8% this year versus 2.6% last year. Mark Marostica – Piper Jaffray: And one last question. As you look out to '09 quarterlies, are there any start periods out of alignment in '09 versus '08 like you experienced with Culinary Q3 to Q4

I don't know right now. We're doing our 2009 business plan. Give me the opportunity. We'll do the plan, and as we get into the first quarter call as we help people model the year, and as John Springer helps you with your models from an IR standpoint we'll try to anticipate that better and give out something in the first quarter guidance. That will be helpful for you I think.

At this time there are no additional questions. I would now like to turn the call back over to Mr. Gary McCullough for closing remarks.

Well today I want to thank you for your time and attention and your great questions for our third quarter earnings call here of 2008. We're working hard throughout CEC to position our company to more effectively serve the needs of our current and prospective students and graduates, and to position the company as we've said, for long-term sustainable growth. When I said earlier in the call, I'm very proud of what we've done so far this year, but we've got a lot of work to do. We see that, and we'll remain on task. And I'm confident, I'm as confident as I've ever been, of our ability to continue to execute against the plan and deliver the 2010 milestones that we previously shared with you. We recognise there are a number of moving parts, which sometimes make it difficult to understand our results and to accurately model what's coming. If you'd like to discuss our results in more detail, please call John Springer, Investor Relations. His number is (847) 585-3899. He's stand by to help you. We'll stand by to take any additional questions to help model what's coming, and to clarify anything that wasn't clear as move through this call. Thanks again for taking the time to listen, and we appreciate your interest and your support of our company.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Thank you and have a good day.