Midday Report: Earnings and Enrollment Slide at University of Phoenix

Produced by Drew Trachtenberg

​Enrollment at the largest for-profit college takes a tumble: Apollo Group (APOL), which operates the University of Phoenix, says quarterly earnings slid by 79 percent from a year ago, as fewer students enrolled.

The company and its competitors are being hurt by federal and state investigations into their operations, and concerns that their accreditation is under review. Apollo said last month that the Higher Learning Commission, which accredits the school, could place it on probation.

A woman walks through the parking lot of the University of Phoenix, part of Apollo Group Inc., is displayed on a building at their campus in Phoenix, Arizona, U.S., on Wednesday, Oct. 28, 2009. Apollo Group, the biggest publicly traded U.S. educator, plunged the most in 19 months in New York after the company said its accounting is being investigated by the U.S. government. Photographer: Joshua Lott/Bloomberg
Joshua Lott/Bloomberg

The commission is concerned about possible problems with the company's administration and governance policies.
Without accreditation, the school could be ineligible for federally-backed student loans.

In addition, a Senate committee is investigating the high level of defaults on federal loans for students attending for-profit colleges;taxpayer funded loans account for about 90 percent of the revenue at the University of Phoenix.

Critics also say that more traditional non-profit colleges offer a better deal than for-profit schools, and that students graduate from for-profits with heavy debt loads and limited job prospects.

All of that is taking a toll on enrollment. Total enrollment at the University of Phoenix fell 15 percent from a year ago, and enrollment of new students fell even more. Overall enrollment is down about 37 percent since peaking in 2010.

But it's not all bad news for Apollo today. Even though earnings were dismal, they were not as bad as expected. As a result, Apollo shares are rallying as much as 10 percent this morning.

That's rubbing off on competitors DeVry (DV) and Bridgepoint Education (BPI), but it's not helping Strayer (STRA), Grand Canyon Education (LOPE) or Career Education (CECO). Most of these stocks are sharply lower compared to a year ago.