Despite continued demand for information technology professionals, enrollment in "tech" courses has declined steadily over the last few years. The widespread perception is that IT careers have limited prospects, due to global outsourcing.

If that trend reversed, it would be a boon for private technical-education providers like DeVry (NYSE: DV) and ITT Educational (NYSE: ESI). And according to recently released survey data, it now looks like that just might be happening.

Interest Tech Education Rebounding
Late last month, the widely followed Taulbee survey, which tracks enrollments in computer science and computer engineering departments across the country, reported that the number of new computer science majors had finally stabilized during the fall 2006 semester, after dropping for five consecutive years.

News that we may have finally seen the bottom in the IT enrollment trend prompted a buying frenzy in DeVry, which jumped nearly 10% on the announcement.

However, a follow-up survey by Wall Street broker Piper Jaffray & Co., suggested that, while interest in IT education is experiencing a bit of revival, DeVry was not be the educational institution of choice for many potential students. A survey of high school guidance counselors revealed that 78% of students had no interest in enrolling in a technology program at DeVry, but 89% indicated they were interested in pursuing tech courses at community college or public university.

So why the overwhelming thumbs down on DeVry?

DeVry Degrees Are Expensive

Getting a tech degree from DeVry is a fairly expensive proposition. On average, a two-year program costs around $51,000 in tuition and other direct costs. This probably explains why DeVry's $22,000 revenue-per-student number is the highest among its peer group of for-profit post-secondary education providers like ITT Educational, Career Education Corp. (Nasdaq: CECO) and Apollo Group (Nasdaq: APOL).

While DeVry still boasts a top-of-its-class 90% post-graduation placement rate, the average starting salary comes in at just over $40,000. That's decent money, but when you consider the debt burden a lot of students probably have after a couple years at DeVry, you're looking at a lengthy payback period on an investment in an education. No wonder a lot of students are considering alternative, and less expensive ways to get a tech degree.

Kickback Investigation Could Impact the Industry
With more and more students forced to seek out student loans, lenders are competing hard for a piece of the market. That competition might have crossed a few legal and ethical lines if a recent investigation by the New York State Attorney General's Office is any indication.

It has been alleged that some lenders have been paying kickbacks to colleges in exchange for being put on a list of "preferred lenders". More than 60 schools, including DeVry have received formal queries as part of this investigation.

While it's still much too early to begin assigning guilt, any potential disruption of the student-loan pipeline can't be good for any of the for-profit post-secondary educational stocks, including DeVry.

Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  10. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!