Shares of Santa Ana-based Corinthian Colleges Inc. surged Monday on word from the vocational school operator that fewer students defaulted on loans in the past two years.
The drop in defaults in 2009 and 2010 brings Corinthian in line with government rules that threaten to cut off federal student loans to schools with high default rates.
Corinthian’s shares were up nearly 10% in afternoon New York trading to a market value of $420 million.
The company said it expects its average two-year default rate for 2010 to be 9% to 12%, down from 22% a year earlier.
The Education Department has proposed a dozen or so rules that would fall hard on for-profit schools such as Corinthian.
They include limits on how schools recruit students and could cut off federal student loans to schools that graduate students with high levels of debt and few job prospects.
Corinthian gets the bulk of its revenue from students with federal loans.
The threat of regulation has nearly crippled Corinthian’s shares, which are down some 75% in the past year.
Corinthian runs more than 100 campuses in the U.S. and Canada offering degrees in information technology, construction, healthcare and other areas. It has about 105,500 students.
For the three months through March, Corinthian said it expects new student enrollments to drop more than expected after a hike in student fees that was done to comply with a federal rule.
Corinthian expects new enrollments to fall 21% to 23% this quarter, versus a previous forecast of a 15% to 17% drop.
The company raised fees by 12% in February, which also prompted Corinthian at the time to up its sales and profit outlook for the current quarter.
On Monday, Corinthian reiterated its February guidance of profits of $16.9 million to $18.6 million, down about 60% from a year earlier, and revenue of $462 million to $472 million, which would be down about 3% from a year earlier.
