Education Stocks: Student Loan Interest Rates to Double

Student loan interest rates for more than 7.4 million students across the country will double if Congress doesn't act fast. According to Bloomberg, the Senate didn't advance the plan to avert a July 1 increase in college loan interest rates to 6.8% from 3.4%. Republicans were holding out for want of an alternative way to cover the $6 billion cost of the extension.

Student-held debt has been escalating out of control: Federal loans for students have reached historical totals with over a trillion dollars owed. It correlates with tuition fees that have increased around 400% since 1982. Worse, Investment News reports that the student loan default rate is on the rise, up nearly 9% for the two-year period ending in 2010.

In the end, it will be the responsibility of Republicans and Democrats to find a solution to the issue on interest rates. As Democratic Sen. Jack Reed of Rhode Island stated, "Both parties have to work together to find a fair and rational way of keeping the student loan interest rate in check."

Business section: Investing ideas
Many for-profit institutions rely on these loans in order for students to afford tuition. Is there a better way to provide services to students?

Read on below to compare educational institutions. How can they provide a more sustainable future for students without the risk of drowning in debt?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Apollo Group (NAS: APOL) : Provides educational programs and services at the undergraduate, master's, and doctoral levels. The company has a market cap of $4.07 billion, most recent closing price at $33.72. Levered free cash flow at $659.83 million vs. enterprise value at $3.41 billion (implies a LFCF/EV ratio at 19.35%).

2. ITT Educational Services (NYS: ESI) : Offers postsecondary degree programs in the U.S. that provide diplomas as well as associate's, bachelor's, and master's degrees. The company has a market cap of $1.51 billion, most recent closing price at $61.94. Levered free cash flow at $215.13 million vs. market cap at enterprise value at $1.40 billion (implies a LFCF/EV ratio at 15.37%).

3. Bridgepoint Education (NYS: BPI) : Provides postsecondary education services. The company has a market cap of $1.07 billion, most recent closing price at $20.15. Levered free cash flow at $130.91 million vs. enterprise value at $745.79 million (implies a LFCF/EV ratio at 17.55%).

4. Capella Education (NAS: CPLA) : Provides online postsecondary education services in the United States. The company has a market cap of $407.26 million, most recent closing price at $30.19. Levered free cash flow at $45.82 million vs. enterprise value at $276.11 million (implies a LFCF/EV ratio at 16.59%).

5. Universal Technical Institute (NYS: UTI) : Provides postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle, and marine technicians in the United States. The company has a market cap of $301.54 million, most recent closing price at $12.17. Levered free cash flow at $30.88 million vs. enterprise value at $188.7 million (implies a LFCF/EV ratio at 16.36%).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

At the time thisarticle was published Kapitall's Kelly Haugen has no positions in the companies mentioned above. The Motley Fool owns shares of Bridgepoint Education.Motley Fool newsletter serviceshave recommended buying shares of Universal Technical Institute and writing puts on Bridgepoint Education. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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