The sector is also being hurt by poor placement. Corinthian Colleges (COCO - Get Report) alone has 40 programs that don't meet federal guidelines under which just 35% of former students have to be repaying their loans, according to DailyFinance.
All this is about to get very political. Gov. Romney has the sector's back and they have his, according to Alternet. As with public schools, Republicans blame unions and government bureaucrats for education's problems, and want to get for-profits into the funding tent to force competition.
This shakeout will take years. Many public and private colleges will close, as will many in the for-profit sector. Only the strong will survive. I think Phoenix will be one of those survivors, but I wouldn't buy any shares in APOL until I have more visibility.Still, the fact of the shake-out has people asking basic questions about how colleges operate. The education establishment that evolves out of this will look nothing like what we have now. There will be fewer, bigger schools, with the Internet doing more of the heavy lifting, and high-quality learning will come within reach of every student, everywhere. At the time of publication, the author had no investments in the companies mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.