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Bilifuduo (98.27)

WTF of the Week.

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October 16, 2010 – Comments (2) | RELATED TICKERS: APOL

Once upon a time, there was a blooming sector called the for-profit education. As the unemployment rate increased, more and more people decided to go back to school because either they had nothing better to do or because they wanted to add things to their resume. Most of these people used Title IV loans which are heavily subsidized by the government. In fact, all of the defaults of the students were covered by the taxpayers, leaving no financial exposure to the for-profit colleges. Everything was going all smooth until the big bad wolf came in: the U.S. Department of Education. As defaults on loans rose, it was like WTF so it is starting to release new guidelines for Title IV loans. Now, for-profit education might have to ACTUALLY consider which types of people it will allow to enroll in its classes >.< Hearing this, Apollo Education was like HELL NO and withdrew its 2011 financial outlook. And it only dropped 23% in a single day, which screwed up pretty much the entire sector. Yay.

2 Comments – Post Your Own

#1) On October 17, 2010 at 12:11 AM, MegaEurope (21.48) wrote:

For-profit education margins are actually around 0%.  +25% for the companies, -25% for the federal government when huge amounts of students default on their loans.

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#2) On October 17, 2010 at 2:13 AM, FleaBagger (29.74) wrote:

For-profit education margins are actually around 0%.  +25% for the companies, -25% for the federal government when huge amounts of students default on their loans.

That's no reason not to invest in these companies. Unless, of course, the DOE gets serious about protecting taxpayers. My prediction is that special interests will, yet again, beat taxpayers.

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