For-Profit College Stocks Lose Ground

Chickens are coming home to roost at for-profit schools whose shares are publicly traded.  For the last several weeks, the stocks have been week. Last week the stocks have take a turn for the worse. Today Strayer University was down as much as 15% . The impetus for this downfall is a report from the US Department of Education. (Via WSJ)

Earlier this summer, the department proposed a rule intended to measure how well for-profit schools train students for gainful employment in a recognized occupation. Late Friday, the department issued its calculations on loan- repayment rates for more than 8,000 schools in an attempt to preview the rule’s potential impact were it to be implemented. Schools could “pass” based on student loan repayment rates, or by maintaining a debt-to-income ratio below a certain percent.

The schools could face tough new regulations stripping them of access to federal funds if their students are found to have heavy debt burdens and if they don’t land jobs earning enough to handle the debt. The regulation sets a 45% repayment rate as the threshold to qualify for student aid. Some argue the department is punishing schools for having graduates enroll in loan-deferment programs that the government itself supports. [Full story]

From Strayer’s 8-k filing today:

>>> If we are found to be in noncompliance with any of these laws, regulations, standards or policies, we could lose our access to Title IV program funds, which would have a material adverse effect on our business. In the 2009 fall term, approximately 72% of our students participated in one or more Title IV programs. Findings of noncompliance also could result in our being required to pay monetary damages, or being subjected to fines, penalties, injunctions, restrictions on our access to Title IV program funds or other censure that could have a material adverse effect on our business.<<<

It is about time! The sooner this sham exposed, the better.