Brazil For-Profit Colleges Slump as Student Loan Rules Tightened

Brazilian education companies tumbled after President Dilma Rousseff’s administration said that government-sponsored student loans must be repaid faster.

Estacio Participacoes SA fell 2.2 percent to 12.09 reais at 4:08 p.m. in Sao Paulo, the lowest since December 2012. Gaec Educacao SA sank 2.3 percent to a record 14.64 reais, and Kroton Educacional SA lost as much as 3.5 percent. The Ibovespa benchmark retreated 1.5 percent.

Loans under the Fies program will now have repayment periods that are one year shorter than they previously were, according to rules published Tuesday in Brazil’s official gazette.

“The changes to Fies are significant, and companies are going to have to either fund the students themselves or face a drop in enrollments,” Marco Aurelio Barbosa, the head of equity research at CM Capital Markets, said from Sao Paulo. “The outlook for the sector is challenging.”

Tighter rules for student loans are part of Brazil’s effort to narrow the budget deficit and preserve its investment-grade status. Rousseff has faced difficulty in gathering support in Congress for austerity measures as her popularity falls to record lows.