For-Profit Colleges Tumble After American Public Scraps Earnings Forecast

For-profit colleges in the U.S. slumped after American Public Education Inc. rescinded its earnings forecast and Washington Post Co. said proposed federal rules may hurt its Kaplan unit.

An index of 12 schools retreated 5.1 percent, the most since December, as American Public Education tumbled a record 32 percent to $28.96 at 4 p.m. New York time. Washington Post, which got more than half its 2009 revenue from its education division, slumped 7.6 percent to $377.56.

U.S. President Barack Obama has proposed tougher industry regulations because of concern that recruiters working for for- profit colleges are signing up unqualified students and leaving them with loans they may be unable to repay. American Public, based in Charles Town, West Virginia, had its stock rating reduced by at least four firms including BMO Capital Markets and ThinkEquity LLC, according to data compiled by Bloomberg.

“There’s a government overhang,” said Frank Ingarra, a Stamford, Connecticut-based money manager at Hennessy Advisors Inc., which oversees about $850 million. “The stocks won’t move forward until you get more clarity on the effect of the government rules.”

Democratic Senators Richard Durbin of Illinois and Jim Webb of Virginia said they have asked for information from the Departments of Defense and Veterans Affairs about how military tuition assistance program money is being spent to pay for education expenses at for-profit colleges.

“American Public Education has recently observed adverse changes in our historical pattern of growth in net course registrations from active duty military students,” the company said in a statement yesterday.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.

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