COCO below S4.00 on sector's downgrades etc.
Sector Snap: Shares of for-profit schools tumble
For-profit school shares sink as investors expect regulators to step up oversight of sector
.
Companies:American Public Education, Inc.Apollo Group Inc.Bridgepoint Education, Inc.Topics:Stocks.Related Quotes
Symbol Price Change
APEI 27.25 -0.79
APOL 35.50 -2.97
BPI 14.82 -0.23
CECO 17.18 -0.36
COCO 3.98 -0.53
{"s" : "apei,apol,bpi,ceco,coco,cpla,dv,edmc,esi,lope,stra,wpo","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""} On Thursday November 4, 2010, 2:55 pm
NEW YORK (AP) -- Shares of for-profit schools dove Thursday after a seemingly routine program review by the Department of Education reawakened fears of greater oversight -- and lower profits -- in the sector.
Several analysts also sounded warnings, concerned about their ability to sign up new students and access government-backed financial aid due to increased scrutiny.
Apollo Group Inc., which owns the University of Phoenix, the country's largest for-profit higher education chain, said on Thursday that the DOE is launching a review of how Phoenix administers federal financial aid. The announcement comes not even five months after the conclusion of another review which cost the school $1.8 million in repayments. The new review will cover the period from the 2009-2010 aid year up to the present.
Program reviews are fairly common, and the launch of a review doesn't mean a school has violated financial aid rules. Yet back-to-back reviews in the past would have unusual, said UBS analyst Ariel Sokol.
"The perception perhaps has been that the DOE.has been asleep at the wheel" regarding oversight of the schools, he said. "In that context, it's not surprising."
A Government Accountability Office report in August found misleading recruitment practices at 15 schools, which the DOE said it could use to act upon. Such reviews could result in fines or restricted access to government-backed financial aid, which makes up the bulk of the schools' revenues.
The University of Phoenix program review "is the initial evidence of an increased enforcement regime" at the Education Department, said Signal Hill analyst Truce Urdan in a research note.
Critics claim the schools are not helping students find better jobs and say enrollment counselors sign up many who are unprepared for higher education. When students drop out, they are still stuck paying back their student loans -- unless they default, and then the bill goes to the taxpayers. Defaults on student loans, most of which are supplied by the government, have been rising throughout the recession.
One DOE proposal is called a "gainful employment" rule that could limit schools' access to federal financial aid if graduates' debt levels are too high or too few students repay loans. It was supposed to be announced by Nov. 1, but intense lobbying from the for-profit sector helped delay finalization until 2011. The DOE held a public hearing on the rule Thursday.
School chains, including Apollo, have been warning investors that they expect student enrollments to drop as they accommodate new rules.
Apollo shares tumbled $2.91, or 7.6 percent, to $35.56 in afternoon trading. Shares of Corinthian Colleges Inc. fell more than 11 percent, hitting a new 52-week low, after a downgrade from UBS. The company said that it may have to raise tuition or risk violating government rules on how much of its revenue can come federal financial aid. It also expects a big drop in new student enrollments.
DeVry Inc. shares dropped 4 percent, while Grand Canyon Education Inc., which was downgraded by Baird, fell nearly 6 percent. ITT Educational Services Inc. fell more than 3 percent, as did American Public Education Inc. Bridgepoint Education Inc., Capella Education Co., Strayer Education Inc., Career Education Corp. and the Washington Post Co., which owns the Kaplan school chain, all had share declines of 2 percent to 3 percent.
Education Management Corp. shares bucked the trend after a better-than-expected earnings report, rising $1.22, or 10.5 percent, to $12.95.
News 
Market Data 
Discover 
AI
