For-Profit Education Marketing Proposal Risks Grow

There are some new concerns over the for-profit education market. Reports were out earlier in 2012 that Senator Harkin was attacking the for-profit education companies in a new round of attacks by targeting the ability of for-profit educators to market themselves.  News was out in April that Harkin and another Democrat would propose a ban against for-profit schools using revenue from federal financial aid for advertising, marketing and recruitment.

There has been chatter today that this Harkin proposal may actually turn into legislation.  Herb Greenberg tweeted this earlier as some of these stocks are being hit today.  What is interesting is that any further legislation is not likely to gain much support today.  Still, it is an election year and any change-in-control of the House of Senate could change the future of the for-profit education sector.

READ ALSO: STUDENT DEBT TO HIT $1 TRILLION BY END OF 2012

Here is how the shares of some of the for-profit players are faring today:

• Apollo Group Inc. (NASDAQ: APOL) is down 3.4% at $33.13 against a 52-week range of $30.93 to $58.29.
• Career Education Corp. (NASDAQ: CECO) is down 3.2% at $6.09 aginst a 52-week range of $5.88 to $25.26.
• DeVry, Inc. (NYSE: DV) is down 3.4% at $27.33 against a 52-week range of $26.13 to $66.85.
• Strayer Education Inc. (NASDAQ: STRA), which has its deal with Jack Welch, is down 3.4% at $86.95.
• Corinthian Colleges Inc. (NASDAQ: COCO) is down only 1.5% at $2.58 and its 52-week range is $1.24 to $5.21.
• Education Management Corporation (NASDAQ: EDMC) is down 2% at $6.61 and is at a year low as the prior 52-week range was $6.70 to $29.90.
• ITT Educational Services Inc. (NYSE: ESI) is down 1% at $54.31 against a 52-week range of $50.22 to $95.52.

This sector has been under fire for years now and 2012 has not been kind to these stocks.  By proposing to limit the ability of these institutions’ marketing and recruiting efforts, you could make the case that it looks and feels like some of the same limitations as those of tobacco companies and their marketing efforts. The comparison is of course extreme, and for-profit education outfits do not pay the same in federal and local taxes compared to the tobacco companies. It is safe to say “Smoking kills.”  Is the same true of for-profit education companies?

JON C. OGG