This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Corinthian Miss Drags on School Stocks

Editor's note: This article has been corrected to reflect that the weighted average rate for the Washington Post's Kaplan is 28%.

SANTA ANA, Calif. ( TheStreet) -- Shares of Corinthian Colleges (COCO) tumbled sharply Friday, dragging sector peers DeVry (DV - Get Report) and Strayer Education (STRA - Get Report) down with it, as fears mounted the for-profit post-secondary education companies may become ineligible for federal aid under newly proposed legislation.

Corinthian Colleges also forecast earnings guidance well below Wall Street's expectations.

The school operator's shares plummeted 15.6% in morning trading Friday at nearly triple their average volume, dragging the rest of the sector along with it. Shares of DeVry lost 5.8%, Apollo Group (APOL - Get Report) 2.1%, Strayer Education 2.4% and Kaplan-operator Washington Post (WPO) 1.2%.

A number of for-profit colleges saw share prices tumble earlier this week on concerns about tighter regulations for student loans. Worries were amplified after data showed nearly two-thirds of for-profit colleges' students were not repaying their loans.

Corinthian averaged repayment rates in the low 20s last year, meaning it could lose its eligibility for federal aid for student loans. The company said it would limit enrollment of new students more likely to default on their loans at some of its colleges, but high-risk students accounted for almost 15% of its total student population in the recent quarter.

Corinthian said it expects first-quarter pro-forma new student growth of less than 2%.

Repayment rates at for-profit schools were just 36% in fiscal 2009, according to research from the Institute for College Access and Success, a student-advocacy group. At private nonprofit schools the repayment rate was 56%, and at state colleges and universities the rate was 54%.

Under the Department of Education's proposed "gainful employment" rule, federal aid would be cut for schools where less than 45% of students are able to repay their loans. Additionally, schools would only be eligible for federal aid if student debt remains below 8% of total income or below 20% of discretionary income.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
APOL $11.27 -0.97%
DV $27.53 -0.15%
STRA $56.19 -1.10%
WPO $699.00 -1.24%
COCO $0.01 1.49%


Chart of I:DJI
DOW 16,749.20 -27.23 -0.16%
S&P 500 1,975.78 -11.27 -0.57%
NASDAQ 4,725.1930 -56.0710 -1.17%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs