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April 30, 2010 2:23 PM For-Profit Schools Take a Hit

By Daniel Luzer

The stock prices of several commercial education companies fell noticeably after a Department of Education official criticized the for-profit sector in a speech he gave at the meeting of the National Association of State Administrators and Supervisors of Private Schools in St. Paul, Minn. According to an article in Inside Higher Ed, Robert Shireman, deputy under secretary at the U.S. Department of Education,

Compared the institutions repeatedly to the Wall Street firms whose behavior led to the financial meltdown and called them out individually, one by one, for the vast and quickly increasing sums of federal student aid money they are drawing down.

It was no idle criticism. The markets reacted in response to Shireman’s announcing the department’s concern. An article by Erin Conroy at Business Week reports that:

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.

Shireman’s specific point was that the regulation of for-profit schools seemed troublesome since accrediting agencies, according to the Conroy article, “depend on financial contributions from the programs they rate.” Shireman suggested that for-profit schools might show better outcomes if they were regulated by a partnership of federal and state governments in addition to existing agencies.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer