Boom Times in For-Profit Education

Sep. 23, 2009 3:45 PM ETSLM, STRA, ESI-OLD, LINC, COCO-OLD, APOL5 Comments
Eddy Elfenbein profile picture
Eddy Elfenbein
993 Followers

Lately it’s been all the rage to complain about companies that are too big to fail. However, there’s another prominent American institution that’s also become too big to fail. It’s bloated, overstaffed and to fails to meet the most basic need of its customers.

Welcome to American higher education.

More Americans are wising up to the fact that college is a big fat waste of money. Sure, if you’re lucky enough, and smart enough, and get into a big-name school, college is just fine. But for millions of other students, a four-year degree often puts them under a mountain of debt and doesn’t give them the skills they need in the job market.

First, let’s consider how long it takes many students to finish college. Even after six years, only 54% of college students even get a degree. For high-school students in the bottom 40% of their class and who go to a four-year college, an amazing two-thirds hadn’t earned a diploma after eight-and-a-half years. Sheesh, that’s worse than Bluto! I can’t think of another industry that has such a dismal record.

As David Leonhardt recently wrote in the New York Times: “At its top levels, the American system of higher education may be the best in the world. Yet in terms of its core mission—turning teenagers into educated college graduates—much of the system is simply failing.” He’s exactly right.

Still, tuition costs continue to skyrocket. Between 1982 and 2007, tuition and fees rose 439% compared with just 147% for median family income. The trend shows no sign of stopping. One year at Yale now goes for $47,500. The University of Florida system wants to raise tuition by 15%, the maximum allowed.

Much like the housing bubble, the Higher Ed bubble is being driven by cheap, government supported credit. The problem is compounded

This article was written by

Eddy Elfenbein profile picture
993 Followers
Fund manager Eddy Elfenbein writes Crossing Wall Street (http://www.crossingwallstreet.com/). He comments on a range of stocks (many of which he owns) and market trends. His work is funny, pithy, rigorous and original. Eddy's philosophy: 'The key to doing well on Wall Street is actually very simple: Buy and hold shares of outstanding companies. But too many investors never learn this valuable lesson. Or if they do learn it, they learn it the hard way. That's where I come in. I want to help investors avoid the mistakes that separate successful investors from those who always find themselves spinning their wheels.' Visit: Crossing Wall Street (http://www.crossingwallstreet.com/)

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