For Profit Education Default Rates Rise (STRA, APOL, ESI)

New statistics released today reveal that the rate of defaults on student loans is rising, particularly in the private education sector. Education Secretary Arne Duncan announced that the national "cohort default rate" for fiscal year 2008, which is the most recent data, is 7% versus 6.7% for 2007. Defaults at public institutions rose from 5.9% to 6%. At private non-profit institutions, defaults increased to 4% compared to 3.7% previously, and at for-profit institutions they went from 11% to 11.6%. Despite the fact that the for-profit schools have by far the highest default rates, they receive a disproportionate share of federal aid dollars. "While for-profit schools have profited and prospered, thanks to federal dollars, some of their students have not,” Duncan said in a statement. “Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use. This is a disservice to students and taxpayers and undermines the valuable work being done by the for-profit education industry as a whole." The for-profit education sector has been hit very hard over speculation that they will not meet new limits that have been proposed on student aid, which would severely impact revenues. For-profit universities derive as much as 90% of their revenues from federal aid. During today's trading session, the Education numbers are being perceived as almost a relief - after all, they could have always been worse. ITT Educational Services ESI has gained 2.97% to $56.87. Strayer Education STRA is up 0.79% to $151.68, and Apollo Group APOL has added 0.95% to $48.01.