The for-profit education sector has suffered declining enrollment in the last few years as the industry struggled with increased government scrutiny and students’ reluctance to take on large amounts of debt in a weak economy.
But there are signs that the worst declines may be over for Downers Grove-based DeVry Education Group, which operates eight for-profit institutions globally.
Shares of the company are up 40 percent from a year ago to the highest level since January 2012 amid optimism that enrollment declines may be slowing.
“There are some signs of stabilization in DeVry undergraduate new enrollment, driven by increased scholarship usage and stronger marketing execution,” Timo O’Connor, analyst at William Blair, said in a research note Feb. 5, the day the company released its quarterly earnings.
DeVry’s new undergraduate enrollments fell 7.9 percent in January to 4,911 compared with 5,330 a year ago, narrower than the 12 percent enrollment decline in November, 19 percent in July and 25 percent in May, the company said.
Joan Bates, senior director of investor relations at DeVry, said in a conference call that the company began offering a scholarship of up to $20,000 for eligible students enrolling for the March session. In addition to the scholarship, Bates said DeVry is revamping its curriculum to provide more degrees in highly sought-after jobs, such as computer programming.
“As we enter 2014, part of our strategy is an enhanced programmatic focus. This includes regularly assessing and adjusting our programs to better meet the needs of our students and employers,” Bates said. The company has also cut costs by closing underperforming schools.
Another potential boost for higher education companies came from President Obama, who announced on Jan. 17 that he was expanding federal support to students, including a doubling of federal Pell Grants and raising the maximum Pell Grant award to $5,635 for the 2013-14 academic year, a $905 increase from the 2008 level.
The Obama administration also announced reforms aimed at reducing the burden of student loans. At the end of this year, students can cap repayment of student loans at 10 percent of their monthly income.
“The hope is that the Obama Administration move will encourage more people to take out loans,” said Patrick Morris, financial advisor and CEO at HAGIN Investment Management. “Clearly there is a correlation between education and job opportunity so the practical answer to under or unemployment is additional post-secondary education.”
Whether this will benefit the for-profit education industry specifically is another question.
“I am not sure that this is going to work as intended, remembering that tuition is still high and rising and the job market is still struggling to show that we can get back to 2007 levels anytime soon,” Morris said.
The sector has been under intense scrutiny for aggressive marketing tactics, low graduation rates and high default rates on federal student loans.
The Obama administration has resumed efforts to pass gainful employment regulations that were first issued by the Department of Education in 2011. These rules, which required for-profit schools to meet certain benchmarks for loan repayment and debt-to-income ratios, were blocked after intense lobbying by the industry. Negotiations on the regulations resumed in December 2013, but ended in a stalemate. The administration is expected to come up with a new draft later this year.
Although DeVry looks like it is heading in a positive direction, it is still struggling with declining revenue and profit.
DeVry’s revenue fell 1.8 percent to $491 million in its fiscal second quarter ended Dec. 31, 2013, from $500 million in the year-ago period, but it was above the Wall Street estimate of $483 million. Earnings per share in the quarter also beat estimates, but are forecast to fall to $2.33 per share in 2014 from $2.86 in 2013, according to Bloomberg LP.
Morris says among the headwinds facing DeVry and other for-profit educators are competition, less accreditation from employers and high tuition rates.
“It is probably too early to know if a company like DeVry has ‘weathered the storm,’ Morris says. “It might be more appropriate to say that the management is doing a good job of managing the business.”
Separately, DeVry lauded its 15 student athletes who participated in the Olympic Games in Sochi, Russia. “They are a great source of inspiration for our students, alumni, faculty and colleagues for all that they’ve accomplished both in Sochi and in their academic pursuit,” David Pauldine, DeVry president, said.
U.S. bobsledder Steven Holcomb, a computer information systems major, won two bronze medals; Elana Meyers, bobsled pilot and silver medal winner, is working on her MBA at DeVry’s Keller School of Management; and Erin Hamlin, bronze medalist in the single luge, is studying sustainability management, the company said in a press release.