DeVry may benefit from looser regulations

DeVry Inc., ITT Educational Services Inc., and Grand Canyon Education Inc. rose today after analysts said the U.S. government may loosen proposed rules that would restrict companies' eligibility for federal student aid.

DeVry, based in Oakbrook Terrace, rose $5.96, or 9.2 percent, to $71.02 at 1:01 p.m., its biggest intraday gain on the New York Stock Exchange since Jan. 27. ITT Educational, based in Carmel, Indiana, gained $9.18, or 8.4 percent, to $117.96. Grand Canyon, based in Phoenix, rose $1.45, or 5.5 percent to $27.73 on the Nasdaq Stock Market.

Proposed Department of Education rules would require education companies to show that graduates earn enough to afford repayment of their student loans. The government may exempt educators from the regulations when more than half of students complete their degree programs and 70 percent of graduates get jobs in fields relevant to their studies, said Kelly Flynn, a Credit Suisse analyst in New York, in a note to clients today.

"The new measure effectively removes the significant threat the rules had created for nationally accredited degree programs with typically high default rates," Trace Urdan, an analyst at Signal Hill Capital Group in San Francisco, said today in a note to clients.

Investor Optimism

The proposed exemption might "fuel investor optimism" that the Department of Education could further ease its proposed regulations in the coming months, She raised her rating on DeVry and ITT Educational to "outperform" from "neutral."

Bridgepoint Education Inc., based in San Diego, rose $1.53 or 6.4 percent, to $25.61. Corinthian Colleges Inc., based in Santa Ana, California, gained 90 cents, or 5.2 percent, to $18.33. Education Management Corp., based in Pittsburgh, gained $2.30, or 10 percent, to $24.84, after earlier increasing 19 percent for the company’s biggest intraday rise in six months.

The concession suggests that Education Secretary Arne Duncan wants to avoid a fight with Republicans in the House of Representatives over the proposed regulations, Urdan said. While the exemption doesn’t require congressional approval, it may help Duncan pass his version of the Elementary and Secondary Education Act, which aims to aims to overhaul standards in U.S. schools, Urdan said.

"We believe investors need no longer fear that significant revenues could be at risk in the event that the rules are passed," he said in the note.