Dropping alongside Apollo Education Group on rumor of an Ackman short: ITT Education (ESI -24.1%), Strayer (STRA -4.2%), DeVry (DV -2.1%), Career Education (CECO -2.1%), Grand Canyon (LOPE -2.6%), American Public (APEI -2.8%), Education Management (EDMC -2.4%), Bridgepoint Education (BPI -2.4%), Lincoln Education (LINC -1.4%).
The White House has proposed rules that could cut federal funding to higher-education training programs if the cohort default rate among graduates for their student loans exceeds 30% for three years in a row.
Programs could also lose out if annual related debt payments surpass 20% of their discretionary income or 8% of their total income.
The proposed regulations are tougher than similar rules that were struck down in court in 2011.
The for-profit sector is unsurprisingly not happy with the rules.
"ITT Educational Services (ESI -2.2%) believes that the CFPB's complaint should never have been filed. The complaint overwhelmingly focuses on issues that are unrelated to consumer finance, and attempts to cast a negative light on aspects of ITT Tech's activities that are extensively regulated by other government agencies."
The core of the CFPB's claims concern just six months of loans, but the bureau knows, says ITT, independent parties provided those loans and the programs ended years ago. "Significantly, ITT Tech did not make any money, in interest or fees, from those third-party programs, which were designed to help students during the recent economic downturn."
"Much of the complaint relies on 'mystery shoppers,' a program that ITT Tech itself voluntarily uses to make sure its policies are being followed by its employees, and to help ensure that errors in implementation are caught and corrected."
"The complaint is an aggressive attempt by the Bureau, recently created by the Dodd-Frank Act, to extend its jurisdiction into matters well beyond consumer finance. It is unjustified as a matter of law and mistaken as a matter of fact."
That's the point, says Herb Greenberg. "It creates a roadmap ... other for profits should shudder."
Lincoln Educational Services Corp provides career-oriented post-secondary education. It offers degree and diploma programs in automotive technology, health sciences, skilled trades, hospitality services and business and information technology.