Fed criticism stings DeVry, Career Education Corp.
Apollo Group Inc., the biggest U.S. for-profit education provider; Career Education Corp.; Grand Canyon Education Inc., and DeVry Inc. fell in stock trading after a trade journal report that U.S. Education Deputy Undersecretary Robert Shireman criticized the companies.
Apollo, based in Phoenix, fell $3.50, or 5.7 percent, to $58 at 12:26 p.m. in New York Stock Exchange composite trading. Grand Canyon, also based in Phoenix, declined 76 cents, or 3 percent, to $24.20. Career Education, based in Hoffman Estates, dropped $3.41, or 10 percent, to $30. DeVry, based in Oakbrook Terrace, fell $4.51, or 6.8 percent, to $62.19.
The Education Department has proposed rules that might make it more difficult for for-profit colleges to recruit students and qualify for federal financial aid programs. In a speech yesterday, Shireman criticized for-profit educators for their growing use of federal student aid, the trade journal Inside Higher Ed reported today on its Web site.
"Allegedly, Mr. Shireman mentioned the for-profit education companies by name in reference to the increasing amount of federal student aid being used by students to attend their schools," said Jeffrey Silber, an analyst with BMO Capital Markets in New York, in a note to clients. "He then compared the relationship between for-profit education companies and national accrediting agencies to the relationship between Wall St. firms and ratings agencies, citing an inherent conflict of interest."
ITT, Bridgepoint SharesITT Educational Services Inc., based in Carmel, Indiana, fell $6.05, or 5.5 percent, to $104.65. San Diego-based Bridgepoint Education Inc., fell 61 cents, or 2.4 percent, to $25.04.Federal aid to for-profit colleges increased to $26.5 billion in 2009 from $4.6 billion in 2000, according to the department.The severity of the remarks was a departure for the Education Department official, who had been "congenial" to for-profit educators, Silber said in the note.Shireman's remarks weren't prepared as a speech, and the Education Department wasn't able to provide a copy of them, said Justin Hamilton, a spokesman."For-profit colleges play a critically important role in helping to ensure so many American's have access to education and training that can improve their job prospects and their lives," he said in an e-mail. "We've had constructive discussions in recent months, and look forward to continued thoughtful dialogue with the career education community."Shireman noted that higher-education accrediting agencies are constituted by, and financially supported by, their member colleges, according to Inside Higher Ed."Federal and state governments cannot rely on accreditors to assure that consumers and taxpayers are protected to full extent that they need to be," Shireman said, according to the report.