January 28, 2010 / 5:13 PM / 9 years ago

Shares of U.S. education cos fall on regulation concerns

Jan 28 (Reuters) - Shares of several U.S. for-profit education providers fell Thursday, a day after the U.S. Department of Education released a draft report with proposed regulatory changes that could affect the companies.

The department released a draft report proposing alternatives to rules regarding debt collection and repayment from students.

The proposed changes would affect more of the longer-term programs such as bachelor or graduate courses offered by companies like ITT Educational Services Inc (ESI.N), Signal Hill’s Trace Urdan said.

Students in these longer programs tend to rack up higher student loan balances, increasing the prospects of default and putting the schools in danger of becoming ineligible to receive money for more federal loans.

“If the companies cannot meet the alternatives (suggested by the government) they would need to be much more selective about the students that they enroll in order to improve their loan default rate metric,” Urdan said, adding that the companies could also reduce the price of the programs.

If the schools fail to meet these regulations, they will become ineligible to participate in the federal student loan programs, he added.

Shares of ITT Education were down 5 percent at $107.34 on the New York Stock Exchange. Apollo Group Inc APOL.O was down 3 percent at $62.45 and Corinthian Colleges Inc COCO.O was down 3 percent at $13.98 Thursday on Nasdaq. (Reporting by Amulya Nagaraj in Bangalore; Editing by Anil D’Silva)

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