WRAPUP 3-Corinthian warns of fee hike, drop in student starts

* Corinthian Q1 EPS $0.38 vs est $0.39

* Bridgepoint Q3 EPS $0.61 vs est $0.53

* Career Education EPS $0.33 vs $0.25 last year

* Bridgepoint sees 2010 student starts up at least 34 pct
(Rewrites; adds details from conference calls, Career
Education’s results)

By Megha Mandavia and A.Ananthalakshmi

BANGALORE, Nov 2 (BestGrowthStock) – Post-secondary education
provider Corinthian Colleges (COCO.O: ) forecast a big drop in
student starts and is considering raising tuition fees from the
third quarter to comply with a tough upcoming rule.

For-profit education colleges, facing criticism for
saddling students with big debts and not fully preparing them
for jobs, are overhauling their enrollment practices to comply
with new rules due to take effect mid-next year.

For a TAKE A LOOK on the sector: [ID:nSGE67G0IH]

Bridgepoint Education (BPI.N: ), boasting of a good loan
repayment rate among its ex-students, bucked the trend by
raising its full-year outlook and forecasting growth in student
starts.

Education companies including market leader Apollo Group
(APOL.O: ) have been posting declines in new enrollments and
guiding toward slowing growth as they take proactive steps to
comply with the new rules.

Corinthian, which offers diploma and associate degree
programs in fields such as healthcare and business, is
evaluating a fee hike to comply with the 90/10 rule proposed by
the U.S. Department of Education.

Violation of the rule, which requires that federal aid
programs should not account for more than 90 percent of a
for-profit education provider’s revenue, could cut off schools’
access to aid.

The company is also evaluating more changes it may need to
make to its current policies and procedures as the final set of
rules were released last week. [ID:nN27253923]

Career Education (CECO.O: ), which reported higher
third-quarter profit (Read more your timing to make a profit.) late on Tuesday, said it was creating a
group to improve the quality of its student outcomes.

Career Education’s new student enrollment for the quarter
rose 6 percent. [ID:nASA00YM0]

Corinthian, whose student repayment rates are among the
lowest in the industry, has already stopped taking in
ability-to-benefit (ATB) students — those who lack high school
diplomas — as they tend to have higher loan default rates.

Schools run by Apollo and Capella Education (CPLA.O: ) have
also taken measures to restrict themselves to higher quality
students.

Pro forma new student starts growth at Corinthian, which
has been cited as a takeover target, slowed to 0.5 percent in
its most recent quarter. The full impact of the enrollment
change will be felt from the December quarter, it said.

“We believe that the company needs a Republican victory in
House and Senate for political leverage for legislative
relief,” said UBS analyst Ariel Sokol.

For a Factbox on impact of U.S. elections, see
[ID:nN29137264]

A good showing by the Republicans in the U.S. mid-term
election on Tuesday could reduce scrutiny of the for-profit
education sector.

BRIDGEPOINT BUCKS TREND

Bridgepoint is the first education company this quarter to
see a big jump in enrollments and student starts, although
growth slowed from the year-ago period.

Students starts for the recent third quarter rose 23
percent while in the year-ago period they rose 55 percent.

“We like the slower start growth, given the perception that
fast growth was going to drive execution or policy risk
higher,” said William Blair analyst Brandon Dobell.

San Diego-based Bridgepoint expects student starts to grow
by at least 34 percent in 2010. In the fourth quarter, it
expects starts and revenue to decelerate sequentially.
[ID:nWNAB9129]

For alerts on Bridgepoint’s results and outlook,
[ID:nASA00YBE]

However, Corinthian expects new student enrollment for its
October-December second quarter to fall 15-17 percent on a pro
forma basis. [ID:nWNAB8936]

Citing uncertainty, Corinthian did not provide annual
outlook and said it was not going to buy back shares in the
near term.

Corinthian shares closed down 5 percent at $4.89 on Nasdaq,
while Career Education shares closed at $18.39.

Bridgepoint shares closed up 11 on Tuesday on the New York
Stock Exchange. The sector index (.15GSPEDUS: ) has lost 45
percent since touching a life high in January.
(Reporting by Megha Mandavia and A.Ananthalakshmi in
Bangalore; Editing by Ian Geoghegan and Unnikrishnan Nair)

WRAPUP 3-Corinthian warns of fee hike, drop in student starts