Did the For-Profit College Bubble Just Go Pop? (Opinion)

Ann McClure's picture
Friday, October 26, 2012

Is higher education a giant bubble? I'd argue that it's probably not. But for-profit higher education just might be, and today we could be witnessing it pop.

Last Tuesday, Apollo Group Inc., the corporate parent of the University of Phoenix, unloaded a round of hellacious news on its investors. The company's fourth quarter net income -- essentially, its profits -- had fallen 60 percent from the year before. The number of new students enrolling had slumped by 13 percent, and yet costs were up. To try and stanch the bleeding, management announced it would shutter more than half of the school's brick and mortar campuses and lay off almost 5 percent of its staff.

Its stock plummeted by 22 percent the next day, and has continued falling since.

As the Wall Street Journal's Melissa Korn reports today, the University of Phoenix is far from alone in its troubles. Buffeted by bad press and aggressive regulators, the major for-profit colleges have tried to heal their images by toughening up admissions standards and devoting more resources to educating students. But the industry's reputation for leaving graduates (not to mention dropouts) deeply in debt and struggling for employment may nonetheless be coming back to haunt it. In 2011, when overall college attendance dropped 0.2 percent, for-profits saw their headcount slide by almost 3 percent, ending a decade-long run of growth in which enrollment had roughly quadrupled. The recent trouble at the University of Phoenix suggests those problems might be accelerating.

Read more »