Pomp and circumstance

16 August 2010 By Robert Cyran Follow @rob_cyran

The likes of Washington Post s Kaplan and Corinthian Colleges fed happily on federal loans to students many of which default. New data suggested just how tough the future may be for the sector, sending shares down 1020 pct. More regulation and higher costs are coming.

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The U.S. Department of Education released repayment rates for student loans at forprofit schools on Aug. 13. It has proposed that programs have their enrollment growth restricted or lose eligibility for federal aid if fewer than 45 percent of student loans were actively being paid four years after commencement of payments and debt service to income is above 8 percent of their starting salary.

Several forprofit institutions appear to fall afoul of the proposal, although it is unclear since the department provided data on a schoolwide level, while the rules will be administered on a programbyprogram basis. Corinthian Colleges, Strayer Education, the Washington Post's Kaplan Higher Education, ITT Educational Services, and DeVry had estimated repayment rates below 35 percent. Shares in all were down sharply in midmorning trading.

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