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Stock Strategist Industry Reports

The Education Industry Fights Back

The market is still overestimating the regulatory impact on education stocks.

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Over the summer, negative stories about the for-profit education industry were not hard to find. A government study showing misleading sales tactics, congressional hearings that painted a negative image of the industry, and stricter industry regulations proposed by the Department of Education all fed into the anti-for-profit education story being pushed by short sellers.

Throughout the summer, the industry was rather quiet--rarely defending itself. We believe most companies and various industry groups were in a holding pattern, waiting for the DoE's official proposal on gainful employment before firing back and defending themselves fully. As the public comment period came to an end in September, the industry finally started its counterattack. After taking their time to digest the gainful employment proposal, education companies, industry groups, and other interested parties sent a barrage of comments to the DoE, explaining their concerns with the proposal. Given the vast number of public comments--estimated to be over 100,000 in number--the DoE recently delayed the publishing of its final gainful employment regulation until early next year (Nov. 1 was the original deadline). It will also hold various meetings and public hearings in the near future to further discuss the issue.

Todd Young does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.