NEW YORK ( TheStreet) -- Shares of education companies are rallying on whispers that an upcoming Department of Education proposal related to gainful employment requirements will be less onerous than originally planned.

Stocks of education companies including Education Management ( EDMC), Corinthian Colleges ( COCO) and Bridgepoint Education ( BPI) were up by double-digit percentage gains on Monday morning.

Education Management shares gained 17%, with Corinthian and Bridgepoint gaining between 10% and 12% early in Monday trading. Apollo Group ( APOL) was up 7.5%.

There was no concrete word from the Department of Education that it was making the gainful employment requirement less cumbersome, however, the Street whispers were all over on Monday that the Department of Ed would be making an announcement within a week, and that it would be better than the worst-case scenario for education stocks.

The Department of Education recently proposed a slate of new requirements for education companies, but the gainful employment requirement for graduates of these privately run, publicly traded education stocks was not including in the proposed rule. The Department of Ed said at the time of the proposed rulemaking earlier this summer that the gainful employment proposal would be issued later in the summer. The gainful employment test would link the student loan funding available for these publicly traded education companies to analysis of the respective institutions rates of placing students in relevant, gainful employment.


The Department of Education aim is to develop a formulaic solution that defines gainful employment using data on student income levels and debt loads, as well as graduation, job placement, and loan repayment rates.

As a result of the highly regulated nature of the education stocks, the shares of the education companies tend to swing with volatility on any rumors of Department of Ed decision-making.

These educations stocks have come back down to earth as quickly as they have shot up, as the market whispers are sifted by reality. These stocks have also attracted a lot of short activity, and on Monday morning, there was the expectation that shorts were rushing to cover positions on the latest whispers of a Department of Ed easing off in new regulation related to gainful employment of students.

"We've seen a lot of these big moves and then in many cases an unwinding in the educations stocks after not very much time," said one market source who did not want to be quoted on rumors, though the source indicated he was hearing all the same things about an impending announcement from the Department of Ed that would be a positive for the education stocks. "My expectation for an announcement was late July, so this would be the right time, and it's the major piece of the new proposal not yet addressed."

-- Written by Eric Rosenbaum from New York.

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