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CNBC EXPLAINS

3 Stock Plays on Rising College Costs

Published: Monday, 16 Nov 2009 | 5:10 PM ET

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By: JeeYeon Park
CNBC.com Writer

The average cost of a four-year college is $26,000 a year, up 4 percent in 2009 alone. What is the value of an education—and are there any alternatives for students seeking a lower price? James Altucher, managing director at Formula Capital, shares his ways to play the rising cost.

“College costs are up over 10-fold in the past 30 years versus health care up 6-fold,” Altucher told CNBC.

“The average undergrad—only about 50 percent graduate within 6 years. So why would you send a kid to college right now? They’d end up four or six years later in debt and still with no clue what to do for a living.”

Altucher said he likes alternative education stocks with solid balance sheets and growth prospects.

“We’re seeing rising enrollment in online education, so the picks and shovels of the entire online education space is Blackboard [BBBB Loading... () ]…that’s my favorite pick in the education space,” said Altucher. “I also like Capella Education [CPLA Loading... () ]. They run online campuses; enrollment is up over 70 percent year-over-year, revenues are up over 20 percent, balance sheets are great with a $157 million cash in the bank and no debt.”

“And the sleeping giant in this space is Washington Post [WPO Loading... () ]: all of their earnings come from the Stanley Kaplan division which runs online schools, all sorts of campuses and so on.”