Subprime goes to college
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These people (ITT Tech, Devry, University of Phoenix) are the startups in many ways. They were willing to take a risk when no one knew if there was any profit in private education and as a reward for that they’re making a big return on investment. But now that the doors are open to private endeavors and it’s clear you can make money there’s going to be competition and that makes everything better. You already see signs of this (Most notably in the incredible achievement that is Western Governors University: http://en.wikipedia.org/wiki/Western_Governors_University)
Right now there’s an artificial stigma that’s still keeping a lot of the internet based competition down but as that begins to fade there will be no way for companies like ITT Tech to maintain their huge profit margins.
The bad part: like the subprime mortgage crisis, when enough people default on loans, and lending standards tighten, it will send ripples through the credit market impacting the entire economy. And like the subprime crisis you can anticipate a government bailout towards the student loan industry as so few people can afford to out-of-pocket their education in the United States.
It's going to be messy.
Because for-profit educational institutions don't have large endowments to bankroll them through tough times and are completely dependent on revenues from continued enrollment. If student debt becomes more difficult to come-by, and/or the government tightens the criteria for student loans, these schools will see their enrollment drop as a significant portion of their clientèle will be unable to afford their services.
Individually they may be susceptible to loss of accreditation, however without the massive legacy costs they are far more capable of jumping though new hoops. I would suggest rather than being dependent on an unstable bubble they are exploiting the inefficiency’s of an entrenched industry.
PS: There is a difference between profiting from a bubble (Home Depot) and being dependent on it (Lehman Brothers).
And if the problem comes at the scale this theory is suggesting, then like mortgage defaults, people may just ignore the collection notices until they get special accommodations.
And some mortgage loans, in some states, are full recourse -- they can go after other assets (including bank balances) and paychecks. That they often don't reinforces my original point: there are plenty of levers creditors theoretically have that can't practically be employed against mass defaults and poor/unemployed people.