If you ever watch any daytime television or late night flicks on cable, you’ve seen them.
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Despite the drastic downturn in the economy, they’re prospering.
With unemployment at a 30-year high, business is booming for career training schools like ITT Tech and DeVry. Leading the pack is Apollo Group, Inc., the parent company of the University of Phoenix, the largest privately-owned accredited university on the planet.
Nationwide, the University of Phoenix has more than 400,000 students, most whom attend through its online division. For the world’s largest online educator, enrollment is up more than 20 percent this year, and earnings are robust.
In a job-starved recession, displaced workers, young and old, are looking for new avenues. Vocational schools offering short-term technical training have become havens. They're a place to acquire new skills as diverse as medical billing, dental assistance, massage therapy and truck driving.
Extending a Tradition
Historically during periods of economic stress, fields of study with clear occupational outcomes are the most popular with students.
Trade schools also offer flexibility for those already employed who are looking to improve their lot. Schools like the University of Phoenix and ITT Tech have proven relationships with employers. They tailor training programs to existing jobs, and they usually have very high placement rates.
The downside for commercial trade schools, whether traditional or online, is the cost. Even the most modest programs cost thousands, forcing students to take out expensive private loans.
In the recent past, job placements for students completing programs at these private schools have been as high as 95 percent. As jobs wither, these placement rates have been steadily dropping and starting salaries likewise have been falling.
In states like California, where unemployment has reached 11.1 percent, the placement rates have dropped even further.
According to the Washington, D.C.-based Accrediting Council for Independent Colleges and Schools, vocational school placement rates in California dropped from 74 percent in 2007 to 68 percent in 2008. Some estimates project the 2009 placement rates to plunge an additional 10-12 percent.
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Despite this dropoff in placements, enrollment growth at these focused private degree programs is expected to continue at a brisk pace. Although Apollo and ITT Tech have seen a pullback in their share values, both are projecting enrollment growth of nearly 20 percent for the upcoming third quarter.
Contributing Factors
Even smaller, regional, privately-owned technical schools are reporting a huge upswing in enrollment. One Sacramento area school, OSC Computer Training, which offers medical billing and other computer-based skills, reported that its second-quarter enrollment was up 200 percent from 2008. Like many of its local counterparts, OSC has added dozens of evening and weekend classes to accommodate the enormous influx of new students.
Employment pressures and the weakened economy also have prompted a growing percentage of graduating high school seniors to rethink their educational plans. Instead of seeking degrees from four-year institutions with an uncertain future and a mountain of debt, technical schools and community colleges have been gaining greater popularity.
With tuition, books and living expenses, the cost of a bachelor’s degree from a top college or university can run between $50,000 to $60,000 per year. Nationwide, the tuition costs for state schools have jumped on average about 12 percent. In response to the budget crunch being faced by some states like California, the expense for a public education is expended to soar even higher.
These financial pressures have caused more young people than ever to opt to pursue career paths in well-paying skilled trades and technical jobs, such as welding, plumbing, electrical or construction management work, rather than turning to traditional four-year college degree programs.
This educational shift has created even greater competition for jobs that have been the mainstay of private vocational schools like the University of Phoenix and ITT Tech. While the experience and stability of older workers may be valued, younger graduates have lower wage expectations. Younger workers also are more attractive because their associated health insurance costs are remarkably less.
Whether this dramatic uptrend in focused vocational education will continue is uncertain. Much will depend on the types and volume of new businesses that sprout from the scorch of the current economy. An additional wildcard is the impact of the President’s stimulus package on job growth in the economy’s vocational sector.
Either way, it appears that the business of training and re-training the American workforce will remain a very profitable enterprise for the foreseeable future.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
