Several for-profit college companies, including a California-based outfit, saw dips in their stock prices this week after a senior education official likened the industry to Wall Street firms that played a part in the financial crisis.
The Associated Press reported that Santa Ana-based Corinthian Colleges Inc. and several major for-profit players that serve students in California experienced drops after Deputy Undersecretary of Education Robert Shireman's speech to regulators last week:
Shares of DeVry Inc. dropped $4.09, or 6.1 percent, to $62.61 on Thursday. And stock in Apollo Group Inc. – which runs the University of Phoenix chain, the nation's largest for-profit school – slid $3.56, or 5.8 percent, to $57.94.
Shares of Corinthian Colleges Inc. fell 87 cents, or 5.1 percent, to $16.04; Career Education Corp. sank 3.36 cents, or 10.1 percent, to $30.05 and Strayer Education Inc. lost $3.04, or 1.2 percent, to $243.71. ITT Educational Services Inc. shed $7.09, or 6.4 percent, to $103.61.
Analysts who track the stocks of publicly traded higher education companies have closely tracked the movements of the U.S. Department of Education, watching for signs that new regulations might cut into these businesses' profits.
According to a piece in Inside Higher Ed, Shireman specifically called out companies that are reaping vast amounts of federal student aid funding:
Anyone in the audience from Corinthian Colleges? Shireman asked the assembled audience Wednesday.
A hand went up. The California-based for-profit higher ed company has seen its revenue from Pell Grants grow by 38 percent in the first three quarters of this fiscal year compared to the last one, he said.
Meanwhile, Shireman said, accreditors can't be trusted to monitor the quality of the institutions that receive federal funding because the watchdogs are run by the organizations they are supposed to police.
In a response posted in the comments section of the Inside Higher Ed piece, Signal Hill research analyst Trace Urdan took Shireman to task for his critique, saying the federal government, not accrediting agencies, are responsible for ensuring federal financial aid dollars are spent legitimately:
Oversight for program integrity – are the students' eligible? and are they actively enrolled in a properly-accredited program? – rests squarely with the Department of Education, not with the accrediting agencies. Furthermore the Department has enormous authority to come down hard on any institution guilty of fraud or malfeasance and has shown no reluctance to use that power in the past.
In another corner, the industry took a hit from Shireman and accreditors in a Business Week piece that revealed some for-profit education companies have increasingly recruited students at homeless shelters:
While many caseworkers for the homeless are gratified by the attention, some see only exploitation. The companies "are preying upon people who are already vulnerable and can't make it through a university," says Sara Cohen, a case manager at Shelter Now in Meriden, Conn. "It's evil."
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