Santa Ana-based Corinthian Colleges Inc. and other for-profit school operators were in the spotlight again Thursday with a Senate committee hearing about federal student aid that investors ultimately shook off, sending shares of Corinthian and others higher.
The hearing by the Senate Health, Education, Labor and Pensions Committee was the first in a series on for-profit school operators, which train students for jobs in healthcare, automotive repair, criminal justice and other areas.
Shares of Corinthian were lower as the hearing played out but then rose in later trading to close up nearly 4% on a market value of $955 million.
Shares of other for-profit school operators also closed higher.
A critic of the schools, hedge fund manager Steve Eisman, testified before the Senate committee.
Eisman, who runs Morgan Stanley’s FrontPoint Partners LLC of Greenwich, Conn., and gained fame shorting subprime mortgages, has described for-profit school operators as “subprime goes to college.”
On Thursday, Eisman called for-profit schools “as socially destructive” as the subprime mortgage industry.
On Wednesday, the head of a trade group representing for-profit schools spoke in defense of the industry.
Harris Miller, head of the Washington, D.C.-based Career College Association, took aim at Eisman, calling him a short seller “constantly warning of economic doom and gloom.”
He called recently proposed federal rules for for-profit school operators “bad policy.”
Earlier this month, the Department of Education outlined rules that require for-profit school operators to provide students with graduation and job-placement rates and limit how the companies pay recruiters to bring in students.
The proposals are part of an effort to crack down on students who take on too much federal aid and run the risk of defaulting on loans.
Corinthian runs more than 100 campuses in the U.S. and Canada offering degrees in healthcare, criminal justice and other areas.
The company and others saw big growth during the recession but have come under fire for students who took on debt they couldn’t afford.
Corinthian’s shares have fallen sharply in recent weeks and now are down 20% for the year after being up as much as 40% in early May.
