Ted Streuli, The Daily Record Newswire
I walked by an ego wall last week, one papered in expensively matted and framed diplomas and certificates of every variety.
“How much are those diplomas worth?” I wondered, but not in the traditional sense of how much more income the bearer has earned because he holds an MBA instead of a BS. I wasn’t curious about what it was worth to the graduate; I was intrigued by what it was worth to the school.
Traditionally, higher education is a non-for-profit enterprise, be it public or private. But in the mid-1990s there was a surge of for-profit education companies, many of which have come under great scrutiny for everything from their recruiting practices to student loan default rates.
For-profit education isn’t new. Fifty years ago, San Francisco’s Heald Business College for Women advertised heavily on daytime television offering to teach typing, shorthand and bookkeeping. In those “Mad Men” days, there might have been a course in how to fetch your boss’s coffee and pick out an anniversary gift for his wife, but I’m merely speculating.
That institution became Heald Business College and eventually just Heald College. It has roots going back to 1863 and the associate degree and certificates offered are for vocational pursuits. The school was among those scooped up in the mid-’90s frenzy, becoming a subsidiary of Corinthian Colleges, which bought Heald’s parent company for $395 million in 1995. Corinthian acquired dozens of similar schools and grew to more than 100 campuses under the names Everst, Heald and WyoTech. Late last year, the company employed more than 15,000 people and had more than 77,000 students enrolled.
That got me wondering: If there’s a reasonable rate of return investing in your own education, what’s the ROI when you invest in others?
Shares in Corinthian Colleges are traded on the Nasdaq under the symbol COCO. Until three years ago, shares sold for about $25, but fell off the ledge in 2011, dropping to less than $1.50. The price fell sharply again a few weeks ago when Corinthian told shareholders that bankruptcy was imminent. Most recently, shares were trading for 23 cents.
The results are also disappointing for ITT Educational Services (ESI), American Public Education (APEI), Education Management Corp. (EDMC), Bridgepoint Education (BPI), and Lincoln Educational Services (LINC), none of which are setting portfolios afire.
Apollo Education Group (APOL), which owns the University of Phoenix, has rebounded over the past year from about $17 per share to $30 or so, but even that is just one-third of the value Apollo had five years ago. Strayer Education (STRA), which had been performing well, reported a 50-percent earnings decline and a 10-percent enrollment drop. Although the stock has bounced back from $33 in January to $51, that’s an 80-percent decline from the $250 share price the company had as recently as 2011.
The lone semi-bright spot for investors has been DeVry, which has been on a steady climb since it bottomed out at $18.35 in June 2012 and was trading recently at $43. Like Strayer, that’s one-third off DeVry’s $65.20 pinnacle in 2010.
The stocks suffered when the White House started to push for reforms. The for-profit colleges were turning in high dropout rates and student loan defaults near 50 percent. Most are small-cap companies whose primary revenue is federal student aid. The risk of losing the federal money, combined with an increasingly wary potential student base, isn’t winning investor confidence.
And that leaves me thinking that the best education investment is still a tuition check.
