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Students At For-Profit Colleges Defaulting on Loans At Astounding Rate (COCO, APOL, STRA, CECO, BPI, more...)

December 14, 2009 10:02 AM EST
The Wall Street Journal highlighted newly released data from the U.S. Department of Education showing that more than one in five students who borrowed money to attend a for-profit college default on the loans within three years.

Currently 21 percent of students who attended non-profit colleges default on federal loans, compared to the 6 percent of graduates from nonprofit and the 7 percent from public four-year schools.

These non-profit colleges are being accused of having less-than-quality standards for admittance into the schools, causing students that are not qualified for higher-education to gain little from the degrees and become unemployable after graduation.

Everest Colleges are a chain of the publicly traded Corinthian Colleges Inc. (NASDAQ: COCO), with twenty-two of its campuses having a default rate of 30 percent. The company's campus in San Antonio, Texas has a default rate of more than 40 percent.

Kaplan, a unit of the Washington Post Co. (NYSE WPO), has seven institutions at or above the 30 percent federal loan default rate level.

There were 316 institutions of the total 5,600 schools who released information on Monday reported default rates over 30 percent, of which three-quarter were for-profits.

In response, starting in 2014, schools that exceed the 30 percent default rate level for three years, or more than 40 percent for one year, could stand to lose federal financial aid. This could put these schools that are supported heavily by federal aid programs, at risk of going out of business.

The default rate after three-years is substantially higher among for-profit schools than the 11 percent rate after two years.

For-Profit Education Stocks That Could See Reaction On the News:

  • Apollo Group Inc. (NASDAQ: APOL)
  • DeVry, Inc. (NYSE: DV)
  • Corinthian Colleges Inc. (NASDAQ: COCO)
  • ITT Educational Services (NYSE: ESI)
  • Strayer Education (Nasdaq: STRA)
  • Career Education (Nasdaq: CECO)
  • Brightpoint Education (NYSE: BPI)
  • Capella Education (Nasdaq: CPLA)
  • Grand Canyon Education (Nasdaq: LOPE)

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