Education Stocks Jittery Over Stimulus Cuts

With the epic stimulus package on the operation table in the U.S. Senate, market observers worry that spending on education may be surgically removed from the plan in order to drop the cost to something that is more palatable for Republican members of Congress.

As senators from both parties have jockeyed to get their own initiatives into the bill, the already steep price tag of $888 billion has steadily increased to a newly recalculated $937 billion. Several Republican attempts to remake the bill with more tax cuts and less spending have failed, so now the expectation is that senators will be forced to pare back some of the spending initiatives in order to gain enough support to finally pass the bill.

A vote is expected later Friday, according to Senate Majority Leader Harry Reid, although Reid had previously said the bill would go to a Senate vote late Thursday.

Just as education stocks like Apollo Group (APOL Quote), Career Education (CECO Quote), Grand Canyon Education (LOPE Quote) and Corinthian Colleges (COCO Quote) rallied when President Barack Obama's stimulus plan initially showed education spending would increase, the sector lost ground Friday while the rest of the market advanced.

The Dow Jones Industrial Average jumped more than 2% during Friday's session, but Apollo Group shares were down 2%. Grand Canyon Education was slipping 1.1%, Strayer Education (STRA Quote) was off 0.3%, and other names in the sector were also trading lower.

Weeks ago, the House of Representative's draft of the bill included an increase in unsubsidized Stafford student loan limits by $2,000 and more funding for Pell grants, which aid low-income families sending children to college, by $15.6 billion over two years, increasing the maximum grant by $500 from $4,850 to $5,350.