NEW YORK — Shares of for-profit education companies slid Monday as government data showed that many of their students aren’t repaying school loans, which could imperil the ability of their students to receive federal financial aid, the bulk of the schools’ revenue.
Several schools contested the government’s methodology, but that didn’t stop shares of the companies from tumbling to their lowest points in a year or more.
For-profit schools offer a variety of programs and certificates, from associate’s degrees in the culinary arts at Career Education Corp.’s Le Cordon Bleu to MBAs from the University of Phoenix.
The government released financial-aid repayment data from more than 8,000 schools, including for-profit, private and public colleges, as an example of how it will decide to grant access to government-backed financial aid.
The Department of Education has been focusing on the schools, promising greater oversight and tougher rules. The industry has been the subject of a string of high-profile hearings in the Senate and a report by the Government Accountability Office that chronicled allegedly misleading and, in some cases, fraudulent recruiting tactics.
But several companies say the government’s complicated formula misrepresents their students’ repayment rates. The repayment rate is a key component of a proposed “gainful-employment rule” that would link student-debt burdens and repayment rates to schools’ access to federal financial aid.
Under the proposed rules, schools would be ineligible to receive federal financial aid if fewer than 35 percent of former students are paying the principal on their loans and graduates are spending more than 12 percent of their income to pay down student debt.
The Washington Post Co. owns the Kaplan school chain, ITT Educational Services, Strayer Education and Corinthian Colleges, all of which have repayment rates below 35 percent. Shares of those entities traded at annual lows Monday.
