A hedge fund is predicting a drop in for-profit education stocks as the tuition bubble bursts. The concern is that student loan debt, and hence defaults, are increasing, and that this will trigger new government rules tightening lending. For-profit institutions, which simply peg tuition rates to any increase in student assistance, will see a decline in enrollments and will be forced to reduce tuition, which will reduce their earnings. The same pressures will impact public institutions, which will have even less flexibility to respond. Via Michael Feldstein, who quotes from the article: "Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive and morally bankrupt as the subprime mortgage industry" said Eisman... "I was wrong. The for-profit education industry has proven equal to the task."
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