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Republicans Could Help For-Profit Colleges

|Includes: APOL, ATGE, Corinthian Colleges, Inc. (COCO)

By Nick Smith

For-profit colleges, struggling amid a weak economy and strengthening regulations, could find reprieve in Republican-sponsored efforts to ease limits on federal grants and loans. Such grants and loans are the predominate source of revenue for education companies.

According to a Bloomberg report, "Republican Representative John Kline from Minnesota, in line to become chairman of the House Committee on Education and Labor, has criticized a proposed U.S. Education Department regulation that ties for-profit colleges' eligibility for student aid to whether graduates pay back their loans. The department today began two days of hearings on the so-called gainful employment rule."

"There's optimism that Republicans will change the higher education debate in Washington and prevent some of the most onerous regulations and legislation from taking effect," said Jarrel Price, an analyst with Height Analytics in Washington, in a Bloomberg telephone interview yesterday.

Shares of Corinthian Colleges, Inc. (NASDAQ:COCO), DeVry, Inc. (DV), and Apollo Group, Inc. (NASDAQ:APOL) are all down considerably this afternoon, to $4.07, $46.11, and $35.48, respectively.

The Bloomberg report notes that "While Republicans are more sensitive to for-profit colleges' concerns about regulation, the industry must still show that its programs are worthy of government support, said Harris Miller, president and chief executive officer of the Association of Private Sector Colleges and Universities in Washington. Some Republicans have called for widespread budget cuts that might affect the Pell Grant program, he said. For- profit colleges received about $7.3 billion in student Pell Grant aid in the 2009-2010 academic year, according to the Education Department."

"We have to show that taxpayers and students are getting a good return on their investments, particularly if budget control and spending control become a central theme," he said.

Disclosure: No position


Disclosure: No position