Shares of many leading post-secondary school operators are flunking out this morning, after a bleak report on crummy student loan repayment rates surfaced over the weekend.
ITT Educational Services
You read that right. It seems that more than two-thirds of the students enrolling in courses at those institutions aren't paying back their loans. At Strayer, only 24% of its enrollees ultimately repay their debt.
The Department of Education is considering putting an end to government-backed loans at schools with inadequate repayment rates, adding insult to empty-pocketed injury. The move makes sense, since the country's already coping with the aftermath of deadbeat mortgagers. The last thing it needs is a wave of deadbeat grads.
The illuminating data deals a nasty blow to an industry that seemed to buck against the recession. Many for-profit educators got high marks during the economic downturn, as consumers made the most of the lull to brush up on their marketable skills.
Sure, there have always been accusations of aggressive marketing strategies, but at least it didn't seem as if for-profit education was a bad business model.
Some educators are holding up better than others. American Public Education
It's easy to see why American Public's near the top. The company targets military personnel and their families for its web-based courses; one would expect a bit more discipline and responsibility among that base of students.
In the end, this eye-opening report will create a new wrinkle for investors performing due diligence before buying into the for-profit education sector. The market for economical and convenient alternatives to costly campuses and trade schools won't go away, and any shakeout will only enhance the position of the survivors.
Once the dust settles, be ready to pounce on the right names. You don't need a post-secondary education to know that much.
Have you ever taken any post-secondary courses through any of these educators? Share your experiences in the comment box below.
Longtime Fool contributor Rick Munarriz got his MBA the old-fashioned way. The real world still had plenty left to teach him. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.