NEW YORK—Shares of companies running for-profit colleges have taken a tumble this week as Wall Street analysts cut their stock ratings following a government report last week questioning the industry’s quality of service.
U.S. Department of Education data showed that 53 percent of for-profit education institutions had poor student loan repayment rates among their students—less than 35 percent of their students paid student-loan principal on time.
Among the top for-profit education companies are Corinthian Colleges Inc., Lincoln Educational Services Corp., and Apollo Group Inc., which runs the University of Phoenix, and The Washington Post Co., which runs Kaplan University.
This week, investment bank Barclays Capital Inc. downgraded its ratings on Corinthian ITT, and Lincoln to “Equal Weight,” citing possible political pressure from Washington to reform the industry.
“While the fundamental operating environment remains generally positive, the court of public opinion and sentiment toward the group has turned highly negative, with continued uncertainty over pending regulatory changes and the prospects of negative legislation from the Senate Health Education, Labor, & Pensions (HELP) Committee, which is holding a series of hearings focused on for-profit colleges,” wrote Barclays analyst Gary Bisbee in a research report.
At the heart of the matter is the federal Gainful Employment regulation, which determines if higher education institutions are eligible to receive federal loans under Title IV. The Gainful Employment proposals will require repayment rate information and salary information at a program level to determine eligibility to provide Title IV loans.
U.S. Department of Education data showed that 53 percent of for-profit education institutions had poor student loan repayment rates among their students—less than 35 percent of their students paid student-loan principal on time.
Among the top for-profit education companies are Corinthian Colleges Inc., Lincoln Educational Services Corp., and Apollo Group Inc., which runs the University of Phoenix, and The Washington Post Co., which runs Kaplan University.
This week, investment bank Barclays Capital Inc. downgraded its ratings on Corinthian ITT, and Lincoln to “Equal Weight,” citing possible political pressure from Washington to reform the industry.
“While the fundamental operating environment remains generally positive, the court of public opinion and sentiment toward the group has turned highly negative, with continued uncertainty over pending regulatory changes and the prospects of negative legislation from the Senate Health Education, Labor, & Pensions (HELP) Committee, which is holding a series of hearings focused on for-profit colleges,” wrote Barclays analyst Gary Bisbee in a research report.
At the heart of the matter is the federal Gainful Employment regulation, which determines if higher education institutions are eligible to receive federal loans under Title IV. The Gainful Employment proposals will require repayment rate information and salary information at a program level to determine eligibility to provide Title IV loans.
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