Tightened loan standards have hurt many sectors of the economy, including for-profit educators who are suffering the fallout from the largest student loan provider's yanking money out from under their more vulnerable students.

Yet one company has been able to boast significant earnings, continue its own student-loan program, and maintain a positive outlook: DeVry Inc.

The Oakbrook Terrace-based provider of for-profit post-secondary education specializes in career-oriented undergraduate and graduate programs in business and technology. DeVry is the holding company for DeVry University, Ross University, Chamberlain College of Nursing and Becker Professional Review.  The company operates 89 campuses in 26 states and Canada, educating over 57,000 students.

Analysts project steady growth in sales and profits for the next few years. Net income is expected to nearly double in 2008.

In January, Sallie Mae (SLM Corp.), the nation’s leading provider of student loans, announced a broad exit from the subprime private loan business to high-risk applicants. This announcement left many for-profit educators, such as ITT Educational Services Inc., Career Education Corp. and Corinthian Colleges Inc., in dire straits.

DeVry, on the other hand, emerged relatively unscathed.  It recently announced fiscal second quarter earnings of $35.8 million, a 118 percent spike from the year-earlier $16.4 million. Earnings per diluted share were 49 cents, up from 23 cents.

Rolling Meadows-based Career Education has watched its stock tumble 62 percent since Oct. 31 to $13.60 on Wednesday. The company said that Sallie Mae’s loan pullout would reduce enrollment, trigger some school closings and layoffs and lead to its pursuit of transitional financial assistance so current students can graduate.  DeVry, on the other hand, has absorbed a stock hit of only 18 percent in the similar period and incites “generally bullish” stances from analysts such as Kevin C. Doherty of Banc of America in New York.

How, when lending standards are tightening, has DeVry managed to best consensus estimates?

For a couple of reasons, said Jeffrey M. Silber, an analyst with BMO Capital Markets Corp. in New York.

“Lenders are shying away from schools that have had high credit risk in the past,” he explained. “The companies that are having the most problems with this, most of their student base is what they call diploma certificate programs.”

Such programs offer highly specialized trade and associate’s degrees, with less of an emphasis, if any, on master's programs. The logic is that the higher the degree achieved, the more likely the graduate will be to land a well-paying job. The more money they have coming in, the more they can afford to send out in the form of repayment.

“DeVry has a relatively low default rate,” he added.  Approximately 80 percent of its enrollment pursues bachelor’s, master’s and doctoral degrees and tend to have a better credit rating, Silber commented in his most recent note.

The second factor is DeVry’s reliance on internal financing for loan applicants, rather than private lenders. According to a note by analyst Brandon Dobell of William Blair & Co. LLC, “In the second half of calendar 2007, DeVry’s SLM-related discount loan program represented less than 1 percent of total revenue.”

DeVry has provided internal financing through its 30-year-old EDUCARD program, which, Dobell wrote, represents about 4.5 percent to 5 percent of revenue and would probably easily absorb the 1 percent dropped by Sallie Mae.

Dobell calls this factor “critical,” as DeVry has had extensive experience in running its own loan program and could handle the extra, albeit relatively small, volume generated from private loans being dropped.

Whether enacted by chance or by design, DeVry’s internal financing model is beginning to catch on with other schools.

“You don’t have a lot of schools doing that,” said Silber. “But a lot of schools are starting to do that now.”

The House Education and Labor Committee released an updated version of the Higher Education Act in February, which, if passed, would increase the "cohort default rate" definition, the rate at which students default on their loans in a given period, from two years to three. With this extension, more students probably will default, potenitally doubling the rate. This could ultimately put schools relying on outside lending dangerously close to losing their Title IV funding.

Ultimately, Dobell feels, this could aid for-profit schools with higher default rates, as they are more susceptible to what he calls “headline risk.” This increased awareness of the issue could in fact conversely boost stock prices. Regardless, DeVry’s robust performance and health in the student lending sets it apart from its competitors, even amidst a sizable fluctuation in its 52-week stock price range.

Analysts on Yahoo Finance predominantly rate the stock outperform, awarding several upgrades in the current fiscal year ending in June.

Despite phenomenal second quarter growth, DeVry cautioned that the back half of its current fiscal year will not be quite as profitable due to increasing expenses.

The company has relocated two of its DeVry University campuses and will be opening as many as six more this fiscal year, said Silber. The Chamberlain College of Nursing has recently been given the go-ahead to double its campuses, reaching four in total, in March. Silber said that additional spending will be funneled towards building Ross’s capacity and developing new hospital affiliations. He contends this will add about $5 million to $7 million in additional costs per quarter.

DeVry’s earnings have been consistent. In its fiscal year ended last June, the second and fourth quarters took a roughly 20 percent dip relative to the first and third quarters. Full-year earnings leapt to $76.2 million from $43.1 million in the prior year. Earnings per share beat analysts’ estimates in all four quarters of the year, according to Yahoo Finance.

For the six months ended Dec. 31, 2007 earnings were $62.6 million, a 68 percent hike from $37.3 million in the comparable year-earlier period.

Analysts estimate earnings upwards of $120 million in the current fiscal year and over $150 million next year.

DeVry stock closed at $44.66 at Wednesday, in the middle of its 52-week range of $26.10-$61.25. The trailing annual dividend rate was 11 cents. The price-earnings ratio was 30, well above that of the Standard & Poor’s 500 Index stocks, 19.

Even with dips in stock price and management’s cautions of less impressive earnings for the second half of the current fiscal year, analysts remain confident that DeVry is poised to coast through the subprime storm with relative ease.