UPDATE: Education Stocks Up On Hopes For Delay In New Rule
(Adds comments from the CCA in the fourth and 11th paragraphs.)
By Shara Tibken Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of for-profit education stocks climbed Friday as expectations grew that the government will delay a pending measure penalizing schools for graduating students with high debt-to-income ratios.
Earlier this year, the U.S. Department of Education recommended capping students' debt load at 8% of their average incomes. The proposal is related to the discussion of "gainful employment" and fundamental questions over how well schools prepare their students to get jobs that can cover their educational debt. Investors have worried that the proposal could hurt for-profit colleges with high tuition and default rates.
But news circulated at the annual Career College Association meeting Thursday that the gainful-employment rules wouldn't be part of the draft regulation expected to be released by the Education Department late next week. The chatter originated with leadership of the CCA, the industry's trade group that earlier this week said it is changing its name to the Association of Private Sector Colleges and Universities.
CCA President Harris Miller told Dow Jones Newswires that he heard about the gainful-employment removal from the draft regulation from "someone I consider a very credible source," but he declined to provide further details of the source's role in the matter.
While analysts said it is difficult to confirm the accuracy of the statement or precise timing of the draft regulation, many analysts, such as William Blair's Brandon Dobell, said "there is a healthy degree of accuracy" in the statements, based on talks with other sources.
"In light of the severely negative sentiment in the group, such a revelation will probably drive a material uptick in valuations," Dobell noted.
The Education Department declined to disclose the specific date on which the draft regulation will be released and also declined to comment