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School Stocks Slammed By Report

Stocks in this article: APOL COCO STRA ESI DV WPO

NEW YORK ( TheStreet) -- The for-profit education sector was once again on the firing line this week facing accusations that schools fail to adequately prepare students for profitable careers while leaving them saddled with heavy debt. In fact, most students don't even make it to graduation day.

It's not a new claim. For-profit schools' stocks traded sharply lower over the summer when the U.S. government proposed regulations that were seen as hurting the industry's booming earnings growth. The Obama administration argued that for-profit schools like Apollo Group (APOL), Everest colleges parent Corinthian Colleges, Strayer Education (STRA) and a number of their peers leave students unequipped for the job market and a means with which to repay their hefty loans.

College

>>School Stocks Fall on Enrollment Outlook

The Education Trust, a non-profit student advocacy organization, released a report Tuesday rehashing many of the statistics demonstrating the sector's rapid enrollment growth, booming profits, staggeringly low graduation rates and high loan default rates.

The report, titled Subprime Opportunity: The Unfulfilled Promise of For-Profit Colleges and Universities , likened the operations of for-profit schools to subprime lenders -- lenders largely held responsible for leading to the collapse of the housing market and ensuing Great Recession.

"As with the collapse of the subprime lending industry, the showdown between for-profit colleges and the government shows how the aspirations of the underserved, when combined with lax regulation, make the rich, richer and the poor, poorer," the report began. "For-profit colleges provide high-cost degree programs that have little chance of leading to high-paying careers, and saddle the most vulnerable students with heavy debt. Instead of providing a solid pathway to the middle class, they pave a path into the subbasement of the American economy."

"It's a heavily recycled report," said RBC Capital Markets analyst Robert C. Wetenhall, offering "nothing new to the whole thesis that's been out all summer."



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