UPDATE 2-Strayer Education program may be ineligible for US aid

* Says arts in general study program found ineligible

* Says program has 700 students

(Adds analyst comment)

March 31 (Reuters) – A Strayer Education Inc
associate degree program that several hundred students have
enrolled in for this spring may not be eligible for federal
student aid, the for-profit college said on Thursday.

Strayer, which has more than 57,000 students enrolled at its
university branches, said the program has about 700 students
signed up for the arts in general studies program for the spring
quarter. The company said the students would be enrolled in
another program.

The Arlington, Virginia-based education provider disagrees
with the finding, which is preliminary, it said in a filing with
the U.S. Securities and Exchange Commission. Strayer is
communicating with the department to resolve the problem.

It is unclear what financial effect this might have on
Strayer.

“We believe that in recent history it has been rare to see
the publicly traded schools lose eligibility for specific
programs,” BMO Capital analyst Jeff Silber said. “However, given
the increased scrutiny of the industry, we would not be
surprised to see more of this — though we note this review is
only preliminary.”

The Education Department review comes after the Obama
administration proposed rules to make for-profit colleges more
accountable for the billions of dollars of federal aid they get
to fund student loans.

The colleges, censured for low graduation rates and high
levels of student debt, would lose access to federal aid, which
accounts for almost 90 percent of their revenue, if they do not
comply with the rules.

With a student loan repayment of about 25 percent, Strayer
has one of the lowest loan repayment rates, putting it at a
higher risk of losing access to federal student aid.

Strayer’s associate degree in arts in general studies lets
students select classes from several disciplines, including
economics, foreign languages, history, mathematics and science,
according to its website.

Strayer did not immediately return a call seeking comment.
An Education Department spokesman had no immediate comment.

Shares of the company closed at $130.30 on Wednesday on the
Nasdaq stock market.

(Reporting by Megha Mandavia in Bangalore. Editing by Robert
MacMillan)

UPDATE 2-Strayer Education program may be ineligible for US aid