Student Debt Won't Hamper These Education Players

The national conversation about college has turned into a national conversation about student debt—but you can invest in college eduction and not have any worry about that issue.

Jun 16, 2014 at 7:00AM

The alarmists are asking if high student loan debt will be the, "next big threat to the U.S. economy" because there's over $1 trillion worth of student loans outstanding. But you can't get ahead without a degree these days, so parents and students alike grit their teeth and take out the loans. None of this is an issue, however, for student landlord Campus Crest Communities (NYSE:CCG).

The only way to get ahead
College is a necessity today if you want to earn a decent living. The average weekly earnings of full-time workers in 2012 was $815. Those with a high school diploma earned just $652 while every level of college degree earned above the average with the lowest earnings coming from bachelor's degrees at $1,066 a week. Similar trends show up in unemployment stats, with more education leading to notably higher employment levels.

It's no wonder that students are willing to take on student debt if that's the price of a college education. And while college enrollment flat lined after the deep 2007 to 2009 recession, Ted Rollins CEO of student housing specialist Campus Crest Communities noted to me in an email interview that, "the population turning 18 it is now back on the rise." Further, adding foreign enrollment to the U.S. demographics uptick suggests that, "...there is a clear path for growth for the foreseeable future." That's a great thing if you are in the education business.

(Source: Mando vzl, via Wikimedia Commons)

For profit/not for profit...
When it comes to student debt, for profit colleges make the biggest headlines. These are companies like DeVry Education Group (NYSE:DV). DeVry is one of the oldest players in the space and runs medical, business, and technology schools domestically and abroad. The company's top line has grown notably over the last decade, increasing by about 150%. However, it's fallen in each of the last three fiscal years (years end June). And revenue has been lower year over year each quarter of the current fiscal year.

Part of the problem is image.

For example, in late 2013, Daniel Hamburger, DeVry's CEO, put out a press release refuting critical points made in a Bloomberg article. One of the core arguments of the Bloomberg piece was the suggestion the DeVry students were at a high risk for default. And early this year, DeVry's Hamburger had to defend against comments from Senator Dick Durbin who sent a letter to Illinois high school principals questioning the value of a for-profit education.

The impact? Although solid results at several schools are keeping DeVry's overall enrollment up, enrollment at the company's largest school, DeVry University, was down over 10% in the March quarter. Part of the process of "fixing" this issue includes lowering costs to attract students.

Source: Raul654, via Wikimedia Commons

How about for property!
If you're an investor, the negative public image of for profit schools like DeVry is a huge uncertainty. And you can't invest in not-for-profit schools.

However, you can invest in education landlords like Campus Crest.

This real estate investment trust owns and manages about 80 properties across 64 markets. It targets under-served, high-growth markets often with properties it built from the ground up.

This model helps ensure both well maintained properties and modern facilities. But the best part is that students don't pay rent with an IOU. Campus Crest CEO Rollins noted to me that, "Student debt levels at the colleges and universities where we operate properties is a non-issue." And while he went on to discuss debt levels, college costs, and value, he summed up the issue when he said, "...if a student is going to default, it is typically not until after they have lived with us and are no longer a student."

The better way to education riches
While a college education is vital to getting ahead, you're better off avoiding the education sector until the debt issue blows over (or up). However, if you still want to invest in education, student housing REITs like Campus Crest are a great option. And with a yield of around 7.6%, Campus Crest is paying you well to wait for the college enrollment upturn Rollins expects.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers