The Apollo Group Inc. has shown investors that a decline in enrollment in its for-profit schools, University of Phoenix and Axia College, wasn't going to depress its stock prices. Bloomberg.com reports that "the company said it managed to shave costs during a troubled quarter" and that "[f]irst-quarter earnings topped analyst estimates despite a 42 percent drop in new student enrollments."
The article goes on to report that investors in Apollo Group Inc. had worried that new government regulations would slash profits for the entire sector. These new regulations were the result of increased government oversight in response to a significant jump in federal loan defaults among students at for-profit universities.
The rise in default rates is due in part to a proliferation of certificate programs. The New York Times recently reported that "[s]hort vocational programs leading to a certificate are becoming the kudzu of the educational world." These programs have grown up in "an economy that increasingly rewards specialization." Yet often these professional certificates are not worth the paper they are printed on. Therefore, "[t]he Obama administration has proposed new rules, to be completed in the coming months, requiring that these schools better prepare students for 'gainful employment.' Certificate programs at nonprofit institutions would also be subject to the rules."
But the article goes on to report that the "for-profit educational lobby argues that, in fact, the criteria are too stiff and would hobble the industry because of so many of its students depend on loans to attend."
For-profit universities have instituted a number of changes in response to new federal regulations. These changes account for the dip in student enrollment at for-profit institutions. But recent layoffs in admissions staff helped Apollo to recover from whatever profits it lost due to a decline in student enrollment. In fact, The Wall Street Journal recently listed Apollo Group among the hot stocks to watch. It looks like that, as for-profit colleges adapt to the new federal regulations, they're managing to continue their winning streak.