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For-profit college stocks hit by latest wave of investor worries

January 10, 2011 | 12:34 pm

For-profit colleges need a refresher course in how to keep investors happy.

Shares of for-profit education companies plunged sharply Monday following Strayer Education Inc.’s announcement late Friday of a 20% drop in new-student enrollment.

The sector has been battered over the last year by the threat of new federal regulations. The Department of Education and some lawmakers are worried that high student-loan default rates are leaving taxpayers on the hook. Investors fear that tougher rules could crimp enrollment and profits of the previously fast-growing sector.

In a news release Friday, Strayer backed away from a profit forecast it had made three months ago. At the time, the company projected 13% enrollment growth at its Strayer University. At that rate, it said, revenue could increase 17% to 18% and earnings per share would be between $11.30 and $11.50.

In its release Friday, the company offered a range of financial projections. Under the worst-case scenario, revenue would fall 1% and per-share earnings would be $7.50 to $7.70.

At 12:30 p.m. PST, Strayer shares were down $36.59, or nearly 24%, to $116.65. Santa Ana-based Corinthian Colleges Inc. fell 70.5 cents, or 13.4%, to $4.575. ITT Educational Services Inc. lost $7.94, or 12.3%, to $56.61.

-- Walter Hamilton