Is the University of Phoenix Good For Students or Investors?

Last Updated Feb 9, 2010 8:15 PM EST

Across the country, traditional colleges are struggling, but for-profit schools such as the University of Phoenix are experiencing tremendous growth.

I'm not prepared to say that the growing popularity of for-profit higher education is a good thing for many students, but the strong trend might provide an investing opportunity.

Wall Street players aren't going to send their kids to schools like University of Phoenix or DeVry University, but they have been slobbering over the stocks in this sector. The stocks of for-profit education corporations have outpaced the Standard & Poor's 500 Index by 40% for each of the past two years.

The Chronicle of Higher Education took an in-depth look at the for-profit higher education world this week and here are nine facts that could intrigue investors:

1. Three decades ago, 100,000 students attended four-profit colleges. Today, about 7% of 19 million college students are enrolled in them. During this period, for-profit universities have been growing at a 9% a year clip. Compare that to the anemic 1.5% annualized growth for traditional colleges and universities.

2. Ninety percent of students at for-profit schools are enrolled in degree programs. Long gone are the days when this niche was dominated by schools training people to become medical assistants, beauticians, auto mechanics and secretaries.

3. There are roughly 3,000 for-profit colleges and universities, but 13 publicly traded corporations own 40% of them.

4. The market's big gorilla is the Apollo Group's University of Phoenix, which has 455,600 students enrolled at its 200 campuses. The University of Phoenix's enrollment eclipses the total enrollment of undergraduates at the Big 10.

5. Half of for-profit schools offer associates, bachelor's or professional degrees.

6. For-profit schools don't employ tenured professors. The academic schedules at these schools accommodate students not teachers.

7. The for-profit education sector burns through huge marketing budgets. During a recent quarter, the Apollo Group spent 20% of its $1.3 billion in net revenue on selling and promotional expenses. If you watch daytime TV, you will see the onslaught of career college ads. These schools are also aggressive Internet marketers.

8. For-profit schools cost more. The average tuition is $14,174. In comparison, the average tuition at a community college is $2,544 and $7,020 at a state university.

9. Students attending proprietary colleges borrow more and they also experience far greater student loan defaults.

10. For-profit universities could be huge beneficiaries of President Obama's push to get millions of more Americans to attend college.

Lynn O'Shaughnessy is the author of The College Solution and she also writes a blog for TheCollegeSolutionBlog. Follow her on Twitter.

Read More:

20 Facts About Today's College Freshman

5 Reasons to Attend a Liberal Arts College

Claim This New College Tax Credit

For-profit university image by azbillboard. CC 2.0.

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