Shares of embattled vocational school operator Corinthian Colleges Inc. rallied Monday after a federal report on student loan defaults wasn’t as bad as feared.
Corinthian’s shares closed up 7% on a market value of about $515 million.
The stock rallied on an Education Department report that showed that student borrowers at for-profit schools had an 11.6% default rate for the 12 months through October 2008.
The default rate was up from 11% a year earlier, according to the report.
Recent data from Phoenix-based Apollo Group Inc., which runs the for-profit University of Phoenix, had led some to expect worse federal numbers, according to a Reuters report.
“What we’re seeing today is a little bit of a relief rally,” Arvind Bhatia, an analyst at Florida investment bank Sterne, Agee & Leach Inc., told Rueters.
Corinthian and other for-profit school operators are under fire for students who took on took on more debt than they could afford.
The company runs more than 100 campuses in the U.S. and Canada that offer degrees in healthcare, criminal justice and other areas.
Corinthian gets the bulk of its revenue from students with federal loans.
The Education Department is looking at new rules that potentially could cut off some schools from federal loans.
The uncertainty has played havoc with shares of Corinthian, which surged during the recession as idled workers sought training for new jobs.
Corinthian’s shares are down some 60% so far this year, even after Monday’s gain and a surge on Friday on possible takeover speculation.
Late last week, Corinthian’s shares jumped as investors bought options on the stock in bets it could rise with a possible buyout.
