For-profit colleges had a big day on the stock market Thursday, after a Department of Education crackdown on the industry was weaker than expected.
Industry watchers feared the Obama administration's new "gainful employment" regulation would yank eligibility for federal student aid from many for-profit college programs, effectively shuttering them. The industry is entirely dependent on its students' federal loans, which generate up to 90 percent of the schools' total revenue.
The final version of the Department's rule requires career college programs to prove they do not saddle their students with insurmountable debt loads and poor job prospects. But it also gives them until 2015 to clean up their act. Programs must fail three years out of four before they will be shut down, in contrast to the earlier version of the rule which would have allowed them only one year to meet the standards. Read more about the regulation here.
ITT Educational Services Inc., which was seen as particularly vulnerable to the new rule, saw its shares jump 19 percent to $83.87. Another vulnerable for-profit college chain, Corinthian Colleges Inc., jumped more than 30 percent to $5.20.
The Apollo Group, which operates the largest for-profit school, The University of Phoenix, was seen as less vulnerable under the new rule. Its stocks still rose 11 percent to $46.90.
(University of Phoenix billboard: Matt York/AP)
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