Corinthian, For-Profit Education Stocks Drop on Repayment Data, Downgrades
Career Education Corp President And CEO Gary McCullough
Jonathan Alcorn/Bloomberg
Nationally, for-profit colleges have a 36 percent student-loan repayment rate, compared with 54 percent at public universities and 56 percent at private nonprofits, according to an analysis of the Education Department data by the Institute for College Access & Success.
Nationally, for-profit colleges have a 36 percent student-loan repayment rate, compared with 54 percent at public universities and 56 percent at private nonprofits, according to an analysis of the Education Department data by the Institute for College Access & Success. Photographer: Jonathan Alcorn/Bloomberg
Colleges owned by Career Education Corp., Corinthian Colleges Inc. and Washington Post Co. have campuses where fewer than 20 percent of federal student loans are being repaid, according to the U.S. Department of Education, which wants to use the data to determine whether programs can remain eligible for aid.
Nationally, for-profit colleges have a 36 percent student- loan repayment rate, compared with 54 percent at public universities and 56 percent at private nonprofits, according to an analysis of the Education Department data by the Institute for College Access & Success, an Oakland, California nonprofit research and advocacy group.
Congress and the Obama administration are proposing tougher regulation and oversight of for-profit colleges, which can rely on federal financial-aid programs for as much as 90 percent of their revenue. The education department released the data on Aug. 13 as it pushes for a rule that could restrict or disqualify for-profit college programs from getting federal grants and loans if their students have loan-repayment rates below 45 percent.
“What we know is that there are many for-profit schools that are doing a great job of educating students, and we know there are some bad actors who have been perpetrating fraud and deceit,” said Justin Hamilton, an education department spokesman, in a telephone interview. “We want to do everything possible to protect students and save taxpayer dollars.”
Misled Students
For-profit colleges have been under fire after a government report found that recruiters at 15 colleges misled students to boost enrollment. Senator Tom Harkin, an Iowa Democrat who has held two hearings on for-profit universities, has said he plans to hold more before the end of the year, and has demanded information from 30 companies. U.S. Education Secretary Arne Duncan, in an Aug. 13 letter to Harkin, said he was beefing up enforcement.
Corinthian Colleges, based in Santa Ana, California, plunged 22 percent to $5.22 as of 4 p.m. in New York. Career Education retreated 6.1 percent to $17.64. Washington Post tumbled 8.1 percent to $315.65 in New York Stock Exchange Composite trading.
Stocks Fall
Strayer Education Inc. sank 18 percent to $163.26. The Arlington, Virginia-based company said the data was “significantly at odds with Strayer University’s own internal analysis” and that it was requesting a meeting to clarify the situation. ITT Educational Services Inc. lost 15 percent to $54.93 after being downgraded to “equal weight” from “overweight” at Barclays Capital.
An index of 12 education stocks fell 7 percent.
Federal grants and loans to for-profit colleges jumped to $26.5 billion in 2009 from $4.6 billion in 2000, according to the Education Department.
The agency said the proposed rule could cut funding to programs, rather than colleges, with low repayment rates, so the university-level data wouldn’t necessarily trigger regulatory action.
In addition, under the regulation, schools failing to meet the threshold could show that their students could meet their obligations based on other criteria, such as their incomes after graduation. The education department said that 5 percent of for- profit programs could lose eligibility under the rule.
Using four years of data, the education department calculated the percentage of students who paid down at least some of their loan principal under a formula that gave more weight to loans with larger dollar value. The data excluded students given deferments because of further education or military service.
Everest College, Corpus Christi
The repayment rate at Career Education’s Sanford Brown College-Hazelwood in Missouri was 9 percent, according to the data posted on the Education Department website. Corinthian Colleges’ Everest College in Earth City, Missouri, had an 8 percent rate. A Corpus Christi, Texas, campus of Washington Post’s Kaplan had a 16 percent repayment rate.
In contrast, the State University of New York at Buffalo had a 59 percent repayment rate; the University of California, Berkley, 73 percent; and Northeast Iowa Community College, 53 percent. Harvard University’s rate was 84 percent and Baylor University’s was 69 percent.
Melissa Mack, a Kaplan spokeswoman, and Jeff Leshay, a Career Education spokesman, said it was too soon to comment on the data. Kent Jenkins Jr., a Corinthian spokesman, didn’t return a call and an e-mail seeking comment.
For-profit colleges tend to educate lower-income students, which may account at least in part for lower repayment rates, Harris Miller, president of the Washington-based Career College Association, said in an Aug. 13 telephone interview. The association represents more than 1,400 for-profit colleges.
To contact the reporters on this story: John Lauerman in Boston at jlauerman@bloomberg.net; John Hechinger in Boston at jhechinger@bloomberg.net.
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