Has the bubble in higher education begun to burst?

To answer that question, we need to look at the performance of marginal higher education institutions that offer a wide range of degrees in a number of academic fields. Here, we mean "marginal" in the economic sense - institutions whose student population is drawn from the ranks of the general population where the economic return of completing a degree program may not be positive. The requirement of providing a wide range of degrees in a number of academic fields is to avoid supply and demand issues for a given profession may affect the demand for a particular field in which a college might specialize, such as law schools.

Here, the for-profit institution of the Apollo Group, the parent company behind the for-profit University of Phoenix and a number of other institutions, would seem to fit the bill. We went through the financial statements that the Apollo Group has filed with the U.S. Securities and Exchange Commission to extract the data they have reported about their enrollment levels since the first quarter of 2004. We selected 2004-Q1 as our starting point because that precedes the Apollo Group's addition of its two-year Associate's degree program later that year.

Our first chart shows the Apollo Group's total reported student enrollment across all its Associate's, Bachelor's, Master's and Doctorate programs:

Here, we observe that student enrollment at the Apollo Group's family of for-profit universities started out at 215,900 in the first quarter of 2004, rose steadily upward on something of an exponential trajectory until the third quarter of 2009, then rose slowly to peak at 476,500 a year later, before entering a period of steady decline since. Through the first quarter of 2015, the Apollo Group's level of student enrollment has fallen to 213,800, which is below the level it reported in the first quarter of 2004, before it added its Associate's degree programs.

We next went through the detailed enrollment data that the Apollo Group has reported in its financial statements on enrollment by degree type to extract the impact that the addition of its Associate's program in 2004 had upon its overall enrollment levels. Our next chart shows what we found:

In this chart, we see that the vast majority of the exponential growth that the Apollo Group/Univerity of Phoenix family of for-profit schools had in the period from 2004 to the third quarter of 2009 took place in its Associates degree program, rising from 3,700 to over 200,000. That growth effectively stalled out after the third quarter of 2009, managing to reach a maximum level of 212,900 a year later, but has since fallen considerably since.

The Apollo Group's Bachelor's Master's and Doctoral degree program enrollment has been more steady by contrast, ranging between 212,500 and 234,000 in the period preceding the official period of the so-called Great Recession, then rising during that period of economic distress before peaking in the fourth quarter of 2010, before falling steadily since.

The Apollo Group's financial statements make for some interesting reading with respect to its reported level of enrollment, as they went from accurately detailing out its enrollment levels by degree type in its financial statements up until its declines in enrollment began. After those declines began, the Apollo Group adopted the strategy of averaging enrollment levels over the four preceding quarters in its annual reports, which is a technique that would, in effect, hide the degree of its declining enrollment.

Beginning with the first quarter of 2013, the Apollo Group no longer details its enrollment levels by degree program, only reporting a total enrollment level. We've projected the enrollment level of its Associate's program and its other degree programs since the fourth quarter of 2012 based on the share of Assoicate's enrollment reported in the Apollo Group's 2012-Q4 10-K filing, where Associate's degree programs accounted for 31.5% of its total enrollment.

In reality, as the Apollo Group's enrollment has plunged, the percentage share of students enrolled in its Associate's degree programs has also been falling. As a result, the Apollo Group's Associate's degree enrollment since 2012-Q4 is very likely lower than what we've indicated in the chart above, while the enrollment of other degree programs is higher than what we've indicated.

Regardless, the Apollo Group's enrollment data indicates that the institution is in considerably worse shape in 2015 than it was before it added its Associate's degree programs in 2004, since a much larger share of its student enrollment today is made up of the academically marginal students who typically enroll in such programs.

The problem for the Apollo Group is that their tuition costs are such that such students are unlikely to obtain a satisfactory return, which would drive their decision to not enroll at the Apollo Group's University of Phoenix and other related institutions, which is what we're really seeing in the enrollment data.