In addition to a range of economic concerns, upcoming graduates are faced with the highest debt burden in history!
The average debt of students graduating this spring is $18,000. This startling figure owes itself to the increasing annual cost of education, which has grown at a constant rate of 5 percent per year. Furthermore, some student loans carry interest rates as high as those of subprime mortgages — read that again … subprime mortgages. As a result, students end up paying an average of $22,900 to alleviate their debt, a figure that has climbed 8 percent from last year and 47 percent over the last 10 years. That’s one sure way to cripple an entire generation of wage earners.
As of December 2010, the aggregate outstanding US student debt stood at $530 billion, a 29 percent increase from December 2007. This news is especially alarming for US households attempting to reduce their collective debt and for graduates striving to attain a solid financial base as they pursue their career ambitions.
In spite of this burden, graduates are hopeful that their education will enhance their financial security in the long run. Statistics have shown that unemployment is significantly less prevalent among college graduates (4.5 percent) relative to individuals without a college education (9.5 percent) and those with no education whatsoever (14.6 percent). Moreover, college graduates on average earn 101 percent more than persons without degrees. In short, while the upfront cost and impending debt of a college education may be staggering, the long-term benefits may still justify the investment.
If you’re in the for-profit education business, all of this is good news. The more debt students can get, the more money they have to pay for education. The more money they have for education, the more schools can charge for the same exact service.
Here’s your Cheat Sheet to the major for-profit stocks that have benefitted from the debt laden education bubble:
Apollo Group, Inc. (NASDAQ:APOL)
Strayer Education (NASDAQ:STRA)
Career Education Corp. (NASDAQ:CECO)
Capella Education Company (NASDAQ:CPLA)
Corinthian Colleges, Inc. (NASDAQ:COCO)
Bridgepoint Education, Inc. (NYSE:BPI)
American Public Education, Inc. (NASDAQ:APEI)
National American Univ. Hldgs., Inc. (NASDAQ:NAUH)
DeVry Inc. (NYSE:DV)
Grand Canyon Education Inc (NASDAQ:LOPE)
Education Management Corp (NASDAQ:EDMC)
Lincoln Educational Services Corp. (NASDAQ:LINC)
If you’re pumping a ton of money onto these school’s income statements, maybe you’d do better making savvy investments or running businesses rather than putting all that money into a degree. Only time will tell.