The last few weeks have witnessed a truly remarkable discussion in Washington and on Wall Street surrounding for-profit higher education.
Reports (and sometimes rumors) about the prospect of tougher federal regulation of career colleges by the Obama administration have made the rounds among Wall Street analysts, driving the stocks of the largest, publicly traded companies in the sector down by more than 20 percent and prompting the U.S. Education Department two weeks ago to hold unprecedented conference calls with investors and analysts to try to reassure them that department officials did not have it in for for-profit colleges.
The biggest dust-up, though, came last month when the department announced that it would undertake a new round of negotiations over possible changes to federal regulations governing policy areas, such as incentive compensation paid to student recruiters, that are predominantly a factor among career colleges.
The announcement of the new regulatory review was made quietly (as is the norm) in the Federal Register, but after some analysts cast the review as big trouble for the industry and others began bombarding the department with calls seeking clarification, Shireman decided to hold the unprecedented conference calls.
Jeffrey Volshteyn, a vice president at J.P. Morgan, is among the analysts who thinks that “people are just reading way too much into this,” and that the department will “enforce the rules just like it always has,” for the for-profit colleges and all others.
Jeffrey Silber of BMO Capital Markets, who is among the longest-serving analysts of the career college sector, tends to agree with Volshteyn that the department is not taking particular aim at for-profit colleges. But he also said that the uncertainty about the department’s agenda for rule making (an agenda that will take shape, in part, out of public hearings that begin this week) and the general inclination toward regulation of a Democratic administration are likely to provide plenty of fodder for those who seek to keep for-profit colleges -- and their stocks -- on the defensive.
“Could you see increased regulation” of for-profit colleges? he asked rhetorically. “Sure, though probably on the margins. But this thing is not going to be resolved for months, and there’s no telling what kind of noise will be generated in the meantime.” [Inside Higher Ed]