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) --

Washington Post


shares fell about 3% this morning after the

U.S. Department of Education released a report

showing that the national default rate rose to 7% in 2008, up from the 2007 rate of 6.7%.

The default rate for public institutions rose to 6% from 5.9%, and was up to 4% from 3.7% for private institutions. The default rate for for-profit schools saw the biggest gain, rising to 11.6% from 11%.

"This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times," said U.S. Secretary of Education Arne Duncan. "The data also tells us that students attending for-profit schools are the most likely to default. While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not.

Investors now worry that the new data could affect the Washington Post's Kaplan Education division, the company's biggest profit driver.

On July 26, the

U.S. Department of Education proposed regulations

that would require for-profit institutions to better prepare students for "gainful employment" or they could risk losing access to federal student aid.

"Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use," said Duncan. "This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole."

The Department of Education will likely finalize the new rules by November 1 this year, and they will go into effect on July 31, 2011.

Washington Post shares have recovered in morning trading, but are down approximately 1% to around $374.

-- Written by Theresa McCabe in Boston.

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