Bloomberg: For-Profit Education Stocks Rise as GOP Opposes Tighter Rules

Bloomberg

December 10, 2010
By Esmé E. Deprez and John Lauerman

Representative John Kline, the Republican who will head the House Education Committee, said he opposes tighter rules for the for-profit education industry, sending company shares higher.

“I would push back really hard against a bill that might come out of Chairman Harkin’s committee,” Kline, of Minnesota, told Reuters, referring to Senator Tom Harkin, the Iowa Democrat who heads the Senate education committee. Harkin has commissioned a government probe of for-profit colleges and held hearings on their sales tactics, use of government funds and program quality.

A measure of 13 education company stocks advanced 2.6 percent at 4 p.m. New York time. Bridgepoint Education Inc. and Strayer Education Inc. gained the most, both adding 5.4 percent.

For-profit colleges have come under growing scrutiny as Secretary Arne Duncan prepares industry regulations and Senate and House committees examine how for-profit colleges mislead applicants, target veterans and register student default rates at least double those of traditional universities. Republicans are raising objections to tougher regulations as they prepare to take control of the House of Representatives in January.

“It looks like this may just be the first public confirmation of a Republican agenda that we’ve fully anticipated: that he would oppose Democratic legislation to regulate the space,” Jarrel Price, an analyst with Height Analytics in Washington, said in a telephone interview of Kline’s comments.

Opposes Rule

Kline views a regulation proposed by the Education Department as unnecessarily harmful to for-profit colleges and their students, said Alexa Marrero, a spokeswoman for the lawmaker.

The gainful-employment rule would restrict colleges from receiving federal aid if data showed their graduates have poor records for repaying government loans. Kline called the proposed rule “confusing and complex,” in an Aug. 2 letter. The rule would take effect in 2012.

“The best approach to protect students and taxpayers is for greater transparency across all sectors,” Marrero said. “He has concerns about arbitrary proposals that would limit students’ higher-education options, as the proposed gainful- employment regulation is currently drafted.”

Bridgepoint, based in San Diego, rose 89 cents, to $17.32, in New York Stock Exchange composite trading. Strayer, based in Arlington, Virginia, increased $7.88, to $154.07, in Nasdaq Stock Market composite trading.

To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net; John Lauerman in Boston at jlauerman@bloomberg.net.

To contact the editor responsible for this story: Jonathan Kaufman at jkaufman17@bloomberg.net