What Stock Prices Tell Us About Higher-Education Policy.

Yesterday, reports emerged that stock prices on many for-profit education companies (you probably recognize their names from online or television advertising) have ticked upward despite a decline in enrollment. DeVry University shares shot up 9.8 percent in afternoon trading yesterday despite the fact that their enrollment fell 4.7 percent this fall.

Why the sudden spike? One reason is the company's profits are still quite healthy, jumping 22 percent even as its enrollment has fallen. But it wasn't just DeVry that saw spikes in stock prices: Apollo, which owns the University of Phoenix; The Washington Post Co., which owns Kaplan University and other test-prep services; Corinthian Colleges Inc.; Career Education Corp.; and Lincoln Educational Services all saw gains ranging from 3.8 percent to 9.6 percent.

One reason stockholders might be optimistic is that certain regulations proposed by the Department of Education, referred to as "gainful employment" regulations that were once perceived to be bad for the industry, might be weaker than initially thought.

"Gainful employment" is a term that was first used in a 1990s version of the Higher Education Act in relation to career colleges or proprietary schools, also known as for-profit schools like those mentioned above. But the term was never officially defined. The result has been a barrage of horror stories, including students finding out after completing a program that the school wasn't properly accredited for them to take a licensing exam or students discovering that their credits didn't transfer to other schools -- even some schools recruiting students from homeless shelters to bump up enrollment numbers.

Now, the Department of Education has proposed regulations to curb bad industry practices. They want to put limits on individual programs (not entire schools, as for-profit education industry advocates would lead you to believe) that leave its students in too much debt compared with their earnings or allow too many students to default on their student loans -- both indications that a student may not be "gainfully employed." In other words, if a given program has an extremely high percentage of its graduates defaulting on its loans, the Department proposed cutting off funds on the grounds the program might not be properly preparing students for employment in the field. Or, if a given program demands students take on debt far out of proportion to their earnings once they graduate (many programs qualify students for entry-level careers in their field with little avenue for advancement, but the programs cost many tens of thousands of dollars), the regulations would also cut off the program's access to federal money.

But while final versions of those regulations are supposed to be released "early this year," they have yet to be released. Since the initial proposal, the for-profit education industry challenged these regulations, first with direct lobbying and rallies on Capitol Hill with students from for-profit schools, then with expensive ad campaigns featuring prominent members of the civil-rights community and other groups representing people of color, and finally, last week, with an outright lawsuit against the Department of Education on earlier regulations that curbed bad industry recruitment practices, which were exposed by a GAO report.

However, an Ed Department official was quoted in Inside Higher Ed saying that the regulations might be more favorable to for-profit education executives: "'The regulations as they come out will be significantly different, better," and "people will appreciate their suggestions having been listened to,' [Assistant Secretary for Postsecondary Education Edwardo M.] Ochoa said." (Disclosure: The advocacy arm of Campus Progress, which pays my salary, has been doing advocacy work to support these regulations, though my capacity of this is limited to writing on this issue as a reporter.)

But if the uptick in stock prices is any indication, the for-profit education industry's stockholders seem encouraged by this news. It seems yet another case in which heavy-handed lobbying by those who have a lot to lose from restrictions on subsidies may end up resulting in favorable regulations. For the for-profit education industry, it's looking like the time. money, and energy put into their opposition of the regulations is well spent.

-- Kay Steiger

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