For Investors, It Pays to Skip School Stocks

BOSTON (TheStreet) -- For-profit post-secondary schools, known for their flexible schedules and aggressive marketing techniques, boomed over the past decade, particularly as people bet that a college certificate would boost their employment chances in the midst of the recession.

They also benefited from huge demand for college and vocational programs that the public sector couldn't meet, low borrowing rates, the increased availability of federal student loan funding, including the G.I. Bill and Pell Grants, low cost and online-course delivery.

But the tide has turned on the $35 billion business, and its prospects appear dimmer almost by the day. Its biggest challenge is the increasing government scrutiny over high student loan default rates, questions about whether its degree offerings actually help their graduates further their careers, some schools' ethics in recruiting vulnerable students and, finally, whether demand will wane as the job market recovers.

As a result, investors are giving the educators' shares an "F," despite some analysts' "buy" ratings on these stocks.