For-Profit Education Primed for Comeback


Michael Brush Image Michael Brush Columnist, MSN Money

The recent crackdown on aggressive recruiting practices and high loan-default rates creates opportunities for the companies willing to adapt, writes Michael Brush of MSN Money.

Visit the Web sites of any number of for-profit colleges and universities and you'll find the happy faces of young people getting state-of-the-art educations and help in landing their dream jobs.

Listen to the critics, though, and you might decide many of the institutions are just clever schemes, fed by government-backed loans, that leave a lot of those shiny young faces disappointed and deep in debt.

At the moment, the critics seem to be winning the debate:

  • Congressional hearings last year put the spotlight on for-profit schools, as student after student testified about their debts and dashed hopes (criticisms I also heard from several students I talked to for this column).
  • The Department of Education (DOE) is rolling out broad reforms of the way the schools operate and market themselves to students.
  • New student enrollment at for-profit colleges is down as much as 20% to 40%, depending on the school.
  • In the face of all this, many stocks in the sector have been pummeled.

For investors, it's possible to capitalize on this uproar to get some very good stocks at low prices—while supporting schools that truly do something useful. And after all, those are the sorts of companies I want to own anyway.

Experts say patient investors may want to take positions soon. When the dust settles, several winners will emerge as solid investments, says Jarrel Price, an analyst with Height Analytics in Washington, D.C., which does research on how new laws and regulatory changes impact stocks.

Price believes for-profit companies will fully adjust to the new rules sometime in 2012.