Strayer Education Program May be Ineligible for US Aid

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.

REUTERS