After a long drawn out analysis of the U.S. for-profit education industry, the Education Department has released a new version of the “gainful employment“ rule that determines whether for-profit schools will qualify for federal student aid, which accounts for 90% of a college’s revenue. Many colleges have been at risk of losing access to federal aid based on an initial proposal from the Education Department a year ago and have seen their share prices plummet while the matter was being decided. But the final decision is much more lenient than it might have been, allowing colleges to pursue profit growth without many restrictions and while remaining eligible for federal aid.
Under the new ruling, some schools will be free to raise tuition fees and return to aggressive admission strategies. But earnings for 2011 will be down as many for-profit colleges saw a sharp drop in enrollment in the last year, despite lowering admissions standards.
The sector sub-index has dropped over 41% since April 2010 when the reforms were first proposed. On Thursday, the index rebounded as much as 16%, with education stocks across the board beginning the day significantly higher than close Wednesday.
Strayer Education (NASDAQ:STRA) stocks are up 14.71% so $139.91 a share, a great improvement, but still desperately below their April 2010 peak of $254.50. Strayer should be one of the biggest winners as the new rule changes the way repayment rates are calculated, increasing their chances of qualifying for federal aid. Strayer operates 89 campuses in 21 states and Washington, D.C., and also offers online instruction.
Corinthian Colleges, Inc. (NASDAQ:COCO) is up 29.32% to $5.16 a share. Perhaps the most impressive rebound of the day, Corinthian Colleges operates the nationwide Everest brand.
American Public Education, Inc. (NASDAQ:APEI) is up 0.94% to $43.91 a share. Shares started the day at $46.72 but have since leveled out to previous numbers.
Education Management Corp. (NASDAQ:EDMC) is up 23.05% to $24.98 a share.
Apollo Group, Inc. (NASDAQ:APOL) is up 9.68% to $46.40.
Career Education Corp. (NASDAQ:CECO) is up 3.89% to $23.76 a share.
Capella Education Company (NASDAQ:CPLA) is up 2.87% to $49.36 a share.
Bridgepoint Education, Inc. (NYSE:BPI) is up 2.53% to $24.28 a share.
National American Univ. Hldgs., Inc. (NASDAQ:NAUH) is up 5.95% to $8.01 a share.
DeVry Inc. (NYSE:DV) is up 13.56% to $61.31 a share.
Grand Canyon Education Inc. (NASDAQ:LOPE) is up 9.91% to $14.09 a share.
Lincoln Educational Services Corp. (NASDAQ:LINC) is up 6.58% to $15.55 a share.