The sector selloff that week was the latest blow to education stocks after the Obama administration announced June 16 that it would seek regulations aimed at stanching for-profit schools' high rate of student-loan defaults and curbing their aggressive marketing practices.
Stocks in the for-profit education sector had a rough 2010. Regulatory uncertainty weighed on the industry, criticism about colleges' graduation rates and student loan repayment rates abounded, future enrollment figures were called into question, schools were accused of failing to adequately prepare students for profitable careers yet leave them saddled with heavy debt and federally proposed restrictions on the industry's business operations cast a shadow no bull market could fully offset.
As education companies face stricter rules, many have been adjusting their operating practices, limiting enrollment to more qualified students and those more likely to be able to repay loans.
"Things seem to be decelerating for them faster than expected," said Sterne Agee & Leach analyst Arvind Bhatia. The analyst also said macroeconomic trends have driven the decline in student starts.
-- Written by Miriam Marcus Reimer in New York.
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