July 24th, 2012: “The College Education Shake Out Has Just Begun”

Have you invested in a for-profit college or training program? Get out while you can.

The warning gun was sounded yesterday by DeVry (DV), which posted disappointing results and led the whole group downward. Investor David Einhorn was reportedly shorting Apollo Group (APOL), the market leader which owns the University of Phoenix. The pain has just begun.

The industry’s problems do not stem from its business model – replacing people with computing as much as possible – so much as its financing model. The group is a big user of private student loans – 42% of its students use them against 14% of public and non-profit students. This area has just popped its own version of the sub-prime bubble, and while the totals aren’t as big as they were for housing 5 years ago, they are still large enough to scare new money from the sector.

Read more here – via Seeking Alpha

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