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Shares of for-profit education companies drop after government data shows that many of their...

Shares of for-profit education companies drop after government data shows that many of their students aren't repaying school loans. ITT Educational Services (ESI -11%), Washington Post's (WPO -11.2%) Kaplan, Strayer Education (STRA -15.9%) and Corinthian Colleges (COCO -23.2%) all have repayment rates below 35%, proposed threshold for a cutoff from federal financial aid funds.
Comments (11)
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    Below 35% ? So, it is practically free education. Why not make it free but rise qualification standards significantly like it is done in many European countries with much better results? If you are smart and hard working, you get your education for free. If not, sorry, you can still get it but you ahve to pay out of your own pocket.
    16 Aug 2010, 09:56 AM Reply Like
  • Tack
    , contributor
    Comments (14270) | Send Message
     
    In Europe one has to pass rigorous tests to gain entry to university, and those that don't qualify go to trade schools and apprenticeships, so they have marketable skills. Here, we maintain a fiction that everybody can gain from an intellectual education, so vast quantities of neither educated nor trained "graduates" leave school with no prospects for gainful employment.

     

    No worries, though, Uncle Sam will give them all needs for free, paid for by the taxpayers, of course.
    16 Aug 2010, 10:04 AM Reply Like
  • coloneldebugger
    , contributor
    Comments (907) | Send Message
     
    butbutbut, the obama says we need more college graduates in this country.

     

    /didn't say anything about the quality of those graduates.
    16 Aug 2010, 10:06 AM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
     
    Shocking that useless degreed citizens are unable to make $800 monthly payments with their McDonald's/Walmart minimum wage jobs.

     

    Wow. Shocking.

     

    Colleges are becoming more worthless as even the most intellectually challenged are encouraged to go into massive debt for a piece of paper.
    16 Aug 2010, 10:07 AM Reply Like
  • Matthew Green
    , contributor
    Comments (457) | Send Message
     
    I wrote an article about this last month. Education is not something that is meant to be commoditized. We, the US taxpayers, have funded individual college educations for well over 60 years, since the GI bill. This has been a great investment in our population's potential, and the return has been superior. For-profit institutions are being subsidized by the taxpayers, often to the tune of 70-80% of their revenues. Defaults aren't non-existent in other sectors of higher education, but the default rate of the non-profits raise the question of whether they provide education sufficient to provide a positive return for the taxpayers. Right now, that isn't happening. With the administration's goals with regard to the percentage of college graduates, for-profits aren't going away. However, in their current form they are unsustainable. The answer is somewhere in between. On the way to that answer, we need to recognize the for-profits for what they are: public corporations whose fiduciary duty is to the shareholders, not the students.
    16 Aug 2010, 10:26 AM Reply Like
  • Tack
    , contributor
    Comments (14270) | Send Message
     
    The answer for education is precisely the same as for housing. One should need to qualify and earn through work effort one's admittance. The notion that people deserve things, houses or educations, without qualification, effort or obligation to participate in the costs is a utopian, bankrupt concept.
    16 Aug 2010, 10:33 AM Reply Like
  • Duude
    , contributor
    Comments (3398) | Send Message
     
    It seems strange that for-profit-schools are to blame for students' nonpayment of their debt obligations. But I think it all has to do with the sort that typically choose the for-profit-schools over those that put up some type of minimum entrance requirement. If a school's only entrance requirement is paying the tuition and that can be done through government loans, you're likely dealing with people that didn't take their original primary and secondary schooling very seriously. They are more typically those that live off the fat of the land and only took some initiative out of desperation. These are likely of the less employable class anyway. The education is likely designed to just create graduates than to truly produce a quality educated individual. A higher nonpayment of obligations seems par for the course.
    16 Aug 2010, 10:39 AM Reply Like
  • davidbdc
    , contributor
    Comments (3183) | Send Message
     
    35% cutoff? How about something like 67%. There is no reason for the government to be subsidizing for profit institutions. We already subsidize state colleges and universities (which I support).

     

    I have nothing against trade schools that earn a profit. But it has to be based on reality and actual demand for the skills they teach...... What is going on right now is one of the biggest scams ever and its being financed by the government. I can't believe how many times I've seen the tv ad for going to college in your pajamas - all financed by the government. Total and utter nonsense.

     

    We already do enough in regards to higher education through state sponsored colleges and universities. Time to cut the cord on the for-profit scams.
    16 Aug 2010, 10:46 AM Reply Like
  • Gary Jakacky
    , contributor
    Comments (2736) | Send Message
     
    These schools are nothing more than fronts for low cost government loans repaid by (many) students at higher rates. An online class of 30 students who 'pay' $3000 per course is taught by an adjunct professor earning, DRUM ROLL PLEASE, $900 to $1200 a course. The rest of the money goes to high pressure hucksters who have to rope in the next generation of students in an endless ponzi scheme.
    16 Aug 2010, 10:51 AM Reply Like
  • Matthew Green
    , contributor
    Comments (457) | Send Message
     
    "Rope in" is one of the best descriptions I've seen. University of Phoenix (APOL) for example, needs to add the equivalent of 1.3 - 1.5 Ohio States per year to just maintain current enrollment levels. Since they are public, they have to keep enrollment rising to meet growth targets. Not that I feel the employment picture is ideal right now, but if there is a marked improvement enrollment levels will drop. Community college enrollment will drop enough so that many who have gone to for-profits can once again be accommodated there.
    16 Aug 2010, 11:09 AM Reply Like
  • TacticalTrader
    , contributor
    Comments (38) | Send Message
     
    Does anyone know how the Department of Education calculates repayment rates?

     

    www2.ed.gov/policy/hig...

     

    From the looks of the data, Harvard Medical School has a 24% repayment rate, and University of Chicago Medical School has a 22% repayment rate. I don't think these schools are going to have their federal funding cut off anytime soon. Is it possible that the data includes borrowers who are in deferment or have other legitimate reasons for non-payment? If so, the data may be overly pessimistic for the for-profits. I don't doubt many of them have serious issues with students not paying back loans, but this data set may not accurately reflect their risk of losing federal support.

     

    Disclosure: I am long COCO as of today.
    17 Aug 2010, 06:57 PM Reply Like
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